Yum's China Sales Miss Mark on Flu Fears

LOS ANGELES – KFC, Taco Bell and Pizza Hut parent Yum Brands Inc. (YUM) Monday reported an 8 percent rise in October same-store sales in China, below the company's long-term target, in part due to consumer fears about a deadly bird flu virus.

Yum shares slipped 1.5 percent following the announcement.

After conversion to U.S. dollars, sales at Yum's Chinese restaurants open at least a year rose 10 percent in the four weeks ended Oct. 31. The company's long-term goal is to post same-store sales increases of 22 percent in that fast-growing market.

"The bird flu scare and challenging comparisons [with strong year-ago results] made this a fairly difficult month," Banc of America (search) Securities analyst Andrew Barish said in a note to clients, adding that Yum's recovery from a food safety scare in China earlier this year has been slower than expected.

The bird flu (search) has infected at least 123 people in Asia and killed 63. Most cases have been blamed on direct or indirect contact with infected chickens. There is no evidence properly cooked poultry can be a source of infection.

In the United States, Yum's same-store sales rose 6 percent in the four weeks ended Oct. 29. Same-store sales rose 8 percent at Taco Bell, 4 percent at Pizza Hut and 6 percent at KFC (search).

Yum Brands also backed its full-year earnings forecast of $2.65 a share. Excluding a one-time item, the company expects to earn $2.64 a share. Analysts, on average, expected 2005 earnings at $2.63, according to Reuters Estimates.

Yum also forecast at least a 10 percent increase in earnings per share in 2006.

Sales in the international division, which excludes China, rose 7 percent in the four weeks ended Oct. 3.

Yum said it will open more than 375 restaurants in China in 2005 and 400 in 2006. The company's China division includes mainland China, Taiwan and Thailand.

Yum shares were down 77 cents, or 1.5 percent, at $51.40 in morning trade Monday on the New York Stock Exchange.