Shares of the newly spun-off Yum China rallied on their first day of trade but strategists warn of dark clouds ahead amid a plethora of problems over the company's growth outlook.
Yum China is now a licensee of its parent company, Yum Brands, after activist investors waged a campaign over the latter's direction in the world's number-two economy, prompting Yum Brands to finally agree to spin off its Chinese operations. KFC, McDonald's, Pizza Hut, Little Sheep Mongolian Hot Pot and East Dawning make up Yum China's brand portfolio, with over 7,300 combined locations in more than 1,100 cities.
For the third quarter, the Chinese division of Yum Brands reported a 1 percent drop in same-store sales, against Wall Street's expectations of a 4.5 percent rise. But Micky Pant, CEO of the Chinese unit, told CNBC that the numbers were a blip ahead of the separation.
Shares closed up 8 percent on Monday but reputation, changing consumer preferences and the Yum menu itself were among the key areas of concern for analysts.