Yum Brands Inc., whose KFC fast-food chain is facing more competition in China, said third-quarter profit fell 68 percent and cut its 2013 earnings forecast as same-store sales dropped in the Asian nation.
Net income decreased to $152 million, or 33 cents a share, from $471 million, or $1, a year earlier, the Louisville, Kentucky-based company said Tuesday. Excluding certain items, profit was 85 cents a share. Analysts projected 92 cents, the average of 23 estimates compiled by Bloomberg. A tax rate increase negatively affected per-share earnings by 10 percentage points, Yum said.
Yum, which gets about three-quarters of its revenue from outside the U.S., is facing more competition from expanding restaurant chains, such as Dicos and Hua Lai Shi in China. It’s also facing a backlash from consumers there after an outbreak of avian flu scared diners away from poultry and a former chicken supplier was investigated for selling food with too much antibiotics. Sales at Chinese stores open at least 12 months fell 11 percent at Yum eateries.
“It’s just taking a little longer than we expected” for China to recover, Jonathan Blum, a Yum spokesman, said in an interview.
The shares fell 6.8 percent to $66.79 in after-hours trading, after closing at $71.67.
Yum lowered its forecast for 2013 earnings, citing “lower-than-expected China sales and a higher-than-expected full-year tax rate.” Full-year earnings excluding certain items will decline at a “high-single to low-double-digit” percentage rate from the prior year, the company said. Yum previously said earnings would decline at a “mid-single-digit” rate.
The fast-food company also cut its forecast for sales in China, saying that fourth-quarter same-store sales there will “unlikely” be positive.