Leading Kentucky-based restaurateur,
Yum! Brands Inc.
) 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
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
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
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
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.
The Cheesecake Factory Inc.
Cracker Barrel Old Country Store, Inc.
). While Fiesta Restaurant sports a Zacks Rank #1 (Strong Buy),
The Cheesecake Factory and Cracker Barrel have a Zacks Rank #2
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YUM! BRANDS INC (YUM): Free Stock Analysis
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