NEW YORK, July 14, 2015:
Yum Brands Inc, the owner of Pizza Hut and KFC, reported its fourth straight quarter of falling sales as it struggles to recover from a food scandal in China, a market where the company makes most of its profit.
The company’s sales at established KFC and Pizza Hut restaurants in China plunged after a television news story in July last year alleged that one of its suppliers was using meat that was past its expiration date.
Food safety is a highly emotive subject in the country, where scandals ranging from toxic baby milk formula to dirty food oil are common.
That makes convincing Chinese customers to come back to a tainted brand tough, marketing experts say.
Same-store sales in China plunged 10% in the second quarter, much steeper than the 8.4% fall that analysts had expected, according to research firm Consensus Metrix.
Adding to the company’s woes in China, calorie-conscious Americans back home are turning to food perceived to be healthier, meaning that Yum has been losing out to newer competitors in the shape of Shake Shack Inc and Chipotle Mexican Grill Inc in the US.
Yum said in May that it would remove artificial colours and flavours from food served in Pizza Hut and Taco Bell in an attempt to woo back diners.
However, revenue fell 3 percent to US$3.11 billion (RM11.82 billion) in the second quarter ended June 13 from a year earlier, missing the average analyst estimate of US$3.19 billion.
Net income fell 30% to US$235 million, or 53 US cents per share, in the second quarter, from US$334 million, or 73 US cents per share.
Yum also took a US$68 million non-cash charge related to carrying down the value of real estate assets in Mexico.
Excluding items, the company earned 69 US cents per share, beating the average estimate of a profit of 62 US cents.