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China dents Yum! earnings

Fast food chain operator Yum! Brands has reported a disappointing third quarter performance as it continues to struggle in China.

Yum! says profit for the quarter ended September 7 plunged 68 per cent on soft KFC China sales.

The Louisville, Kentucky company said net income decreased from $471 million in 2012 to $152 million this year.

Sales in China stores fell 11 per cent including five per cent growth at Pizza Hut and 14 per cent decline at KFC, which has still not fully recovered from the adverse publicity surrounding the December poultry supply incident and bird flu scare.

It expects its China division same-store sales to remain negative in the fourth quarter.

“Given a slower-than-expected sales recovery at KFC China and a higher-than-expected tax rate, we are now estimating a high-single to low-double-digit percentage decline in full-year EPS versus prior year,” said Yum! Brands chairman and CEO David Novak.

However he is optimistic KFC sales will recover from the adverse publicity.

Despite challenges, Yum! is still on track to open at least 700 new restaurants in China this year. The company currently has more than 6000 restaurants in the world’s second largest economy.

Meanwhile, in India, where it has more than 600 restaurants, Yum! system sales increased 20 per cent, driven by 24 per cent unit growth.

Yum! has nearly 40,000 restaurants worldwide under brands KFC, Pizza Hut and Taco Bell.

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