Louisville, Kentucky-based famous restaurateur
Yum! Brands Inc.
) yet again witnessed a decline in its China Division's
comparable sales (comps) for the month of October 2013. China's
comps have dropped 5% in October as a result of a 7% fall in the
same at KFC brand. However, the rate of decline moderated from
the 11% shortfall reported in September.
On the other hand, Yum!'s Pizza Hut Casual Dining registered
10% growth in China in October, better than the September comps
growth of 6%.
In Dec 2012, Yum! Brands faced an allegation regarding the
quality of chicken supplied to its KFC units in China. Although
food safety regulators in Shanghai cleared Yum! Brands, the
incident shattered consumer confidence about the quality of food
offered by this U.S. restaurateur leading to a steep fall in its
sales results in China. The outbreak of avian flu in China in
April further added to the company's woes and marred China
Division sales performance.
China, which once played a pivotal role in Yum! Brands' growth
story over the past few years, began to witness lackluster sales
performance since fourth-quarter 2012 due to the above
The company posted an 11% decline in third-quarter comps,
reported on Oct 8, 2013, for its China Division which was much
lower than a 6% rise in comps in the year-ago quarter. Quarterly
fall in comps was caused by a 14% drop in the same at KFC owing
to the continued unfavorable impact of the poultry supply issue,
partially offset by a 5% rise in comps at Pizza Hut Casual
Poor sales performance at KFC China in September compelled
YUM! Brands to state that the China comps will continue to be
down in the fourth quarter. However, management expects its
business to improve from 2014 onwards driven by its new
Even though the Zacks Rank #4 (Sell) company has undertaken
quality assurance measures, marketing campaigns and various
promotional offers, it will take some time to completely recover.
Further, all these initiatives will likely result in incremental
expenses that will weigh on the bottom line. A lower earnings
outlook for 2013 remains an overhang.
) recently reported soft comps for the month of October. Global
comps were up 0.5% in October versus negative comps of 1.8% in
the comparable year-ago period.
Some other players in the restaurant industry which look
attractive at present include
Cracker Barrel Old Country Store, Inc.
Bob Evans Farms, Inc.
). Both the companies hold a Zacks Rank #2 (Buy).
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YUM! BRANDS INC (YUM): Free Stock Analysis
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