KFC parent in a flap over dodgy Chinese chooks
A fall in profits would snap an 11-year run of profit growth of at least 13 per cent.
The US company, based in Kentucky, gave the grim forecast after profits in the fourth quarter fell 5 per cent, with a key sales figure in China dropping.
The company expects sales at restaurants in China to plummet 25 per cent for January and February.
Since an investigation aired on Chinese television on December 18, Yum! has been dealing with an "onslaught of negative media attention" over its chicken suppliers.
The TV station reported that Yum!'s suppliers were ignoring regulations and giving chickens unapproved levels of antibiotics.
A government investigation was concluded on January 25 and Yum! has agreed to adopt measures to strengthen its oversight of suppliers. But the company says it will take time to recover.
"Our primary emphasis now is to rebuild consumer confidence and sales in China," the company said.
Even though Yum! has far more locations in the US, its restaurants in China are more profitable because the cost of doing business there is lower and there is more room for growth.
China's economic growth has been a boon for Yum!, helping it register a streak of growth for more than a decade.
Although the investigation into chicken suppliers did not focus solely on KFC, the chain was hit hard because it is the biggest chain in the country.
Yum! said net income fell to $US337 million ($324 million) in the fourth quarter, from $US356 million a year ago, on revenue up 1 per cent at $US4.15 billion.
Yum! said it opened 1976 fast food restaurants for the year, including 889 new outlets in China.
Frequently Asked Questions about this Article…
Yum! Brands warned it expects a drop in profits after fourth-quarter results showed a 5% fall in profits and a key sales figure in China weakened. The company said rebuilding consumer confidence and sales in China is its primary emphasis.
Yum! Brands reported fourth-quarter net income fell to US$337 million from US$356 million a year earlier (a 5% decline), while revenue was up about 1% at US$4.15 billion.
Yum! said it expects sales at restaurants in China to plummet about 25% for January and February following the controversy over its chicken suppliers.
The controversy began after a Chinese TV investigation aired on December 18 reporting that Yum!'s suppliers were allegedly ignoring regulations and giving chickens unapproved levels of antibiotics.
A government investigation concluded on January 25. Yum! agreed to adopt measures to strengthen its oversight of suppliers, but the company said recovery will take time.
Although Yum! has more locations in the US, its China restaurants have been more profitable due to lower costs and greater room for growth. China's economic expansion helped Yum! sustain more than a decade of strong growth, making China a key profit driver for investors to watch.
No. The investigation did not focus solely on KFC, but KFC was hit particularly hard because it is Yum!'s biggest chain in China.
Yes. For the year the company opened 1,976 fast-food restaurants globally, including 889 new outlets in China, even as it works to rebuild consumer confidence after the supplier issue.
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