February 5, 2009

Yum Brands intends to continue expanding its food business China, with the hope that its China division could overtake the US business in size.

Despite the economic slowdown, Yum executives maintain they can still build KFC and Pizza Hut stores in smaller Chinese cities where competitors are backing off on expanding.

Yum is targeting 500 new restaurants in China, and eyeing another 900 new units in other parts of the world.

Same-store sales in Yum's China business grew just 1 percent in the fourth quarter, below the expectations of analysts. Since December, when the company last updated sales, Yum Chief Financial Officer Richard Carucci said sales have been in line to slightly below Yum's internal expectations.

Analysts feel that Yum may have to reconsider its expansion plans in China if the trend of slower same-store sales growth continues.

The economic slowdown in China is driven more by slowing exports than consumer spending, and a stimulus package from the Chinese government should boost spending, said Yum Chief Executive David Novak.

Also, the growing middle class in China should mean more customers can afford Yum restaurant offerings, Novak said.