KFC owner Yum Brands issues profit warning on China food scandal

Scare over old meat hit sales  at the fast-food chain’s Chinese outlets

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The Independent Online

Yum! Brands, the American owner of KFC and Pizza Hut, has issued a profit warning after being hit by food safety fears in China.

The fast food giant warned a China food scare in the summer, relating to a Shanghai supplier selling old meat, had hurt sales at its KFC and Pizza Hut chains in the country.

Yum!’s earnings forecast was less than appetising, sliced from growth of more than 20 per cent to between 6 per cent and 10 per cent. The Chinese food fears meant its third-quarter sales fell 14 per cent at restaurants open more than a year in the region, with operating profit tumbling 40 per cent to $202 million  (£126 million).

The group said that while “sales are rebounding, they continue to be negative” in China. But it added that its brands have  “proven resilient over time and we expect this to be the case with this situation as well”. China contributed 35 per cent of Yum!’s total operating profit last year.

 

Yum! chairman and chief executive David Novak, said: “I’m absolutely confident in Yum! Brands’ ability to deliver strong, sustainable growth in the years ahead despite the recent supplier incident in China.” The company will continue to expand in the country, and plans 700 new restaurants this year.

It is continuing its turnaround of Pizza Hut in its home market. But group sales fell 3.2 per cent to $3.35 billion in the quarter to September 6, below Wall Street expectations.

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