YUM's China Sales Surge in December - Analyst Blog

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Leading Kentucky-based restaurateur, Yum! Brands Inc. ( YUM ) has recently reported a 2% rise in its China same-store sales (comps) for the month of Dec 2013, better than the November comps growth of 1%.

The comps growth was driven by a 5% sales increase at KFC, offsetting a 3% decline in sales for the Pizza Hut Casual Dining brand.

The company has witnessed positive comps growth for its Chinese Division in both October and November against a decline in most of the prior months. The China Division accounts for more than double of the U.S. revenues.

The negative publicity regarding the quality of chicken supplied to KFC China in Dec 2012 and the outbreak of avian flu in mid-April have been hurting the company's top line since fourth-quarter 2012.

Additionally, Yum! declared China Division's sales expectation for fourth-quarter 2013 (comprises of September, October, November and December) which is estimated to decrease by 4%. The decline is expected to be due to a 4% fall in KFC comps, offset by a 5% rise in the same at Pizza Hut. This is, however, in line with management's expectation of lower sales results for the fourth quarter.

Poor sales at KFC China in Sep & Oct 2013 compelled Yum! Brands to admit that comps in the region will continue to be down in the fourth quarter as well. However, management expects its business to improve from 2014 onwards driven by new sales-driving initiatives.

In an attempt to improve brand recognition and concentrate on high-potential geographical markets, especially China and India, the company has recently reorganized and merged its Yum! Restaurants International (YRI) and the U.S. divisions for each of its three brands - KFC, Pizza Hut and Taco Bell.

Given its persistent efforts, the company expects operating profit at its China division to grow 40.0% in 2014. However, it expects foreign currency translation to have a slightly negative impact on 2014 results.

YUM! Brands has a Zacks Rank #3 (Hold). Investors interested in the restaurant industry may consider stocks like Fiesta Restaurant Group, Inc. ( FRGI ), The Cheesecake Factory Inc. ( CAKE ) and Cracker Barrel Old Country Store, Inc. ( CBRL ). While Fiesta Restaurant sports a Zacks Rank #1 (Strong Buy), The Cheesecake Factory and Cracker Barrel have a Zacks Rank #2 (Buy).



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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: CAKE , CBRL , FRGI , YUM

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