Significant Sales Decline in China May Impact Yum! Brands, Inc. (NYSE:YUM)’s 3Q14 Earnings:

Albany, New York (10/06/2014) – Yum! Brands, Inc. (NYSE:YUM) is set to release its 3Q14 earnings tomorrow on October 7, 2014, after the market close. The 3Q14 earnings are expected to show significant impact of steep sales decline within China. Morgan Stanley analyst, John Glass, expects Yum to report earnings of $0.81 per share in 3Q14 as compared to $0.89 per share in the consensus estimate. Mr. Glass also noted to keep track of management comments pertaining to fiscal 2015 guidance. He maintained ‘equal-weight’ rating for the stock with a price target of $72 a share, which is in line with its previous closing.

China Sales Decline

Yum! Brands, Inc. (NYSE:YUM) last month announced that the company estimated same-store sales in China to decline about 13% in 3Q14, following a food safety scare. One of its suppliers in China was alleged of using expired meat in July 2014. Since then, the company’s China division is experiencing a strong negative impact to sales at both Pizza Hut and KFC. Yum operates nearly 6,400 restaurants in China, which accounts for more than half of its overall sales. Sales decline in China is bound to impact the company’s 3Q14 earnings and will also have a material effect on FY14 earnings. Yum is pursuing legal action against the suppliers to recover damages and may provide a further update during its upcoming conference call on Wednesday, October 8, 2014.

2014 Sales Performance

Yum! Brands, Inc. (NYSE:YUM) reported 17% increase in its China Division system sales, significantly outperforming worldwide system sales growth of 4% in 1Q14. The company reported 21% increase in its China Division system sales, significantly outperforming worldwide system sales growth of 6% in 2Q14. The company also reported strong 21% and 18% increase in India Division system sales during 1Q14 and 2Q14.

Brand wise, KFC Division system sales increased 4% whereas Taco Bell and Pizza Hut Division system sales remained even during 1Q14. During 2Q14, KFC Division and Taco Bell Division system sales increased 5% and 3% respectively whereas Pizza Hut Division system sales decreased 1%.

Scott Sally

Scott Sally

Sally joined the US Markets Daily News Team in April 2011 as a Multimedia Journalist.