October 9, 2014

China meat scandal hurts Yum!'s Q3 earnings

China's recent expired meat scandal has led to lower earnings for Yum! Brands in the third quarter of 2014. 

This week, the company, which owns KFC, Taco Bell, and Pizza Hut, posted Q3 earnings per share of US$0.87, slightly lower than the US$0.88 consensus. Its revenue for the same period is US$3.35 billion, below the US$3.45 billion projection.

Yum Brands' sales plummeted after its Chinese supplier, Shanghai Husi Food, was found to have sold beef and chicken that were months past their expiry dates to the company's fast food outlets.

With lower Q3 earnings, the company is poised to scale down its full-year per-share earnings' projection from 20% to 6-10%.

KFC has since switched to different meat suppliers.

Although consumer confidence in the company has been hurt, Yum!'s chairman and CEO, David C. Novak, said that sales in China have been moving towards recovery.

"We expect to develop at least 700 new restaurants in China this year, which we're confident will ultimately deliver high returns as we further capitalise on the world's fastest growing consuming class," Novak added.

Yum! is depending on KFC's significant presence in the world's most populous nation, as China accounts for more than half of the company's international sales.