Yum Warns on 2013 as China Scare Hurts KFC

Steven Senne

The parent company of Kentucky Fried Chicken, Pizza Hut and Taco Bell beat earnings forecasts for the fourth quarter, but shares are falling in after-hours trading as tainted chicken fears led to weaker China KFC sales.

China comparable-store sales fell 6 percent following the media scrutiny surrounding its food safety. As a result, Yum expects a mid single-digit decline in earnings per share for 2013 from a year earlier.

Chinese food safety authorities said in late December that KFC was supplied with chicken that contained excess amounts of antibiotics. China is an important market for Yum, making up over half of its revenues and operating profits.

"We are obviously proud of our track record of achieving double-digit EPS growth, and I am as confident as ever we can deliver this performance over the long term," CEO David Novak said in a press release. "However, as a result of adverse publicity from the poultry supply situation in mid-December, China KFC sales experienced a sharp decline. Due to continued negative same-store sales and our assumption that it will take time to recover consumer confidence, we no longer expect to achieve EPS growth in 2013."

For the fourth quarter, Yum Brands reported adjusted earnings of 83 cents a share on revenue of $4.15 billion. A year earlier, the company earned 75 cents on revenue of $4.11 billion.

Analysts had expected the company to report earnings excluding items of 82 cents a share on $4.12 billion in revenue, according to a consensus estimate from Thomson Reuters.

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