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Yum! Brands still burdened by struggles in China

Yum! Brands has lowered its guidance for the fiscal year due to continued struggles in its China division and challenging foreign exchange rates, the parent company of Taco Bell, KFC and Pizza Hut announced Tuesday.

Full-year EPS growth will be “well below” the company’s 10 percent target, CEO Greg Creed said. 

Net income at the company grew 4 percent year over year during Q3, to $421 million. Total revenues increased by 2 percent, to $3.4 billion.

Comp sales stabilized somewhat in its China division during Q3, increasing 2 percent year over year, but not to the level executives had hoped. The company expects to end the year with negative comp sales in China.

“We’re pleased same-store sales turned positive and we achieved restaurant margins of nearly 20 percent in our China business,” Creed said in a statement. However, Creed noted that “unexpected headwinds” such as tougher exchange rates were making recovery slower than expected. Leadership in the China division was “taking significant actions to get sales, traffic and profits back to historic levels,” he said.

Net income at Yum! Brands fell 30 percent during Q2, dragged down by sales declines in China stemming from food-safety concerns after allegations that one of the company’s suppliers was using tainted meat.

Outside of China, the company’s Taco Bell and KFC divisions saw continued sales growth during Q3, with comp sales rising 4 percent year over year at the former and 3 percent at the latter. Comp sales across Pizza Hut locations remained relatively flat, growing 1 percent.

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