Yum Brands Warns China Sales Fell More Than Expected

Yum Says Key Fourth Quarter Sales in China to Fall
Steven Senne

KFC parent Yum Brands on Monday warned that sales in its key China division shrank more than expected in the fourth quarter, and it reiterated an earnings forecast that was below what Wall Street expected.

Yum said China sales fell 6 percent in the quarter, versus its earlier 4 percent forecasted decline. In a regulatory filing, it blamed "adverse publicity" from a Chinese government review of the country's poultry supply and the impact it had on KFC sales in China in the last two weeks of December.

(Read More: Yum! Brands: Pros' Trades After 9 Percent Drop)

Chinese food safety authorities said in late December that KFC was supplied with chicken that contained excess amounts of antibiotics, and the company said at the time that it had seen some impact on sales from the publicity.

"These things happen. They have historically always recovered," said Bernstein Research analyst Sara Senator.

(Read More: Yum Tweaks China Growth Plans, Targets More Pizza Huts)

Yum has more than 5,100 restaurants in China, which contributes more that half of its overall revenue and operating profits. In addition to the negative headlines around its chicken supply, KFC is also facing tougher competition and a pickier customer base in the country.

The company said it expects 2012 earnings per share, excluding special items, of $3.24. Analysts polled by Thomson Reuters I/B/E/S on average expected earnings of $3.26 per share.

Shares of Yum fell 4.1 percent in after-hours trading. Yum said it would report a full set of results on Feb. 4.