GloucesterTimes.com, Gloucester, MA

Business

February 5, 2013

Yum warns of profit decline in 2013

NEW YORK (AP) — Yum Brands warned that it expects profit for the year to decline as the parent company of KFC, Pizza Hut and Taco Bell works to recover from a controversy over its chicken suppliers in China.

The company, based in Louisville, Ky., gave the grim forecast after its profit in the fourth quarter declined 5 percent, with a key sales figure in China dropping more than the company had forecast.

Since an investigation aired on national Chinese television on Dec. 18, Yum has been dealing with an “onslaught of negative media attention” over its chicken suppliers, said spokesman Jonathan Blum said. The TV station had reported that Yum’s suppliers were ignoring regulations and giving chickens unapproved levels of antibiotics.

A government investigation into the issue was concluded on Jan. 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,” Blum said, noting that the company plans to mount a “brand reputation” campaign in coming weeks.

For the fourth quarter, a key sales figure fell 8 percent in China, more than the 6 percent decline the company had forecast. It marked the first decline in the region since 2009.

Even though Yum has far more locations in the U.S., its business in China is far more profitable because the cost of doing business there is less. Yum is the biggest Western fast-food chain in China, with about 5,400 locations. The nation’s economic growth had until now been a boon for Yum, helping it register an annual profit growth of at least 10 percent over the last several years.

1
Text Only | Photo Reprints
Business

Pictures of the Week
Your news, your way
Comments Tracker
AP Business Videos
After Fukushima, Japan Eyes Solar Power New York Auto Show Highlights Latest in Car Tech New York Auto Show Highlights Latest in Car Tech High-flying Tech Stocks a Concern for Investors "Heartbleed" Bug Puts Internet Security at Risk AP Tech Review: Samsung Galaxy S5 Toyota Recalls 1.8M Vehicles in the US Comcast Executive: 'Merger Not a Problem' Microsoft Ends Support for Windows XP Study: Airline Industry Complaints Drop in 2013 Study: Airline Industry Complaints Drop in 2013 Employers Add 192K Jobs; Rate Stays at 6.7 Pct Senators Press Barra About GM's Delay in Recall More Americans See Middle Class Status Slipping GM CEO Faces House Hearing on Recall NHTSA: GM Should 'Fix Vehicles Quickly' GM's CEO Testifies on Faulty Ignition Switches Owner, Families Share Cobalt Stories Jury Selection Begins in Apple-Samsung Case BMW Plans $1 Billion Expansion in South Carolina