Officials for Yum! Brands Inc. said the third quarter’s “disappointing” results worsened the company’s full-year outlook and would make a recovery to positive same-store sales in China highly unlikely by the fourth quarter.
Despite the ongoing strain in China, where same-store sales declined 11 percent for both the Sept. 7-ended third quarter and the month of September, chief executive David Novak expressed confidence that 2014 would be “a bounce-back year” for Louisville, Ky.-based Yum, if China recovers over time and if the company makes its projected profit growth in the United States and the emerging markets in Yum Restaurants International.
Since last December, when a Chinese state television report questioned that nation’s supply of chicken and implicated some of Yum’s former poultry suppliers, the company’s nearly 4,500-unitbrand in China has reported double-digit same-store sales losses. The pressure worsened in April when new fears of avian flu spread through Shanghai and other Chinese cities, depressing KFC’s sales further, even though Yum’s other major brand in China, Casual Dining, began to rack up monthly same-store sales increases in the mid-single digits.
KFC’s continued struggles in China show that, even though the public’s perception and trust of the brand and its supply of chicken are moving in the right direction, they have not fully recovered, Novak said. He added that Yum needs not only more time to turn around the China division and specifically KFC, but also more innovation.
“We’ve done a good job on the value front, but we haven’t presented the concept as innovatively as we need to in order to get the business to the next level,” Novak said. “We’ll have something we can be more excited about next year.”