Food scare forces Yum to cut profit forecast
YUM Brands has cut its profit outlook for the year, citing the latest food scare in China that pummeled sales at its flagship KFC chain.
The company, based in Louisville, Kentucky, said it now expects earnings per share to rise between 6 and 10 percent from a year ago, instead of the growth of at least 20 percent it previously forecast.
Yum, which also owns Pizza Hut and Taco Bell, is trying to recover from a TV report this summer that showed one of its suppliers using expired meat. The company noted it was hurt by the controversy even though it got a limited number of products from the supplier in question, a unit of OSI Group.
During the quarter, KFC’s sales fell 14 percent at established locations in China, while Pizza Hut’s sales dropped 11 percent. China is a critical division for Yum, which gets 35 percent of its operating profit from the country.
McDonald’s, which has much deeper ties to OSI spanning the globe, was far more affected by the supplier scandal, with many restaurants unable to serve basic items like burgers and chicken. McDonald’s has also warned it expects the controversy to hurt its quarterly results, which it is slated to report on October 21.
Back in the US, Yum reported mixed results for its three chains. For its best performer in the country — Taco Bell — sales rose 3 percent at established locations, boosted by the national launch of a breakfast menu.
Sales rose 2 percent at KFC and fell 2 percent at Pizza Hut.
For the quarter, Yum said it earned US$404 million, or 89 US cents per share.
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