China KFC sales recovering
Jun 27, 2013
Yum Brands says a key sales figure for China has dropped 19 per cent in May, as the parent company of KFC began to see signs of recovery from the double whammy of a bird flu scare and an earlier controversy over its chicken supply.
The drop is an improvement from the 29 per cent decline in April.
The company said the latest figure reflects a 25 per cent decline at KFC and 12 per cent growth at Pizza Hut.
On Monday, McDonald’s Corp also blamed fears over bird flu for a decline in China sales for the month.
Yum Brands Inc said that it expects sales at established restaurants to continue recovering over the course of the year and to turn positive in the fourth quarter.
Although publicity around the bird flu continued to have a “significant, negative impact” in May, Yum noted that the impact of past cases of bird flu has been short-lived.
“Based on current trends, we believe this will again be the case,” the company said in a regulatory filing on Tuesday with the Securities and Exchange Commission.
China is a critical region for Yum, which has benefited greatly from the country’s rapid economic expansion in recent years.
The company, based in Louisville, Kentucky, is the biggest US fast-food operator in the country with 5300 locations, most of them KFC restaurants.
In 2012, Yum raked in more than half its total sales from China.
But late last year, a Chinese TV report said some of the company’s suppliers were giving chicken unapproved levels of antibiotics. Yum was slow to adequately address the concerns and sales plummeted.
The company later took a more aggressive stance and said it was eliminating more than 1000 small producers from its chicken supplier network and launched a marketing campaign to assure customers of the safety of its food.
Yum has been reporting its monthly sales figures for the region to keep investors updated on its recovery efforts.
At the end of March, progress was interrupted when a new strain of bird flu surfaced in the country.
Still, Yum executives note that the company has overcome similar scares in the past. And the company stands by its plans to continue opening new locations at a rapid clip this year.
For the China division’s second quarter – which includes March, April and May – Yum says the sales figure fell 20 per cent. Yum shares fell $US1.19 to $US70.57 in after-hours trading.