Yum Lowers Profit Forecast

Northern, WI 02/05/2013 (avauncer) - Owner of KFC and Pizza Hut, Yum! Brands Inc.(NYSE:YUM) after stating that due to probe into its chicken suppliers in China, there will be fewer sales than expected fell in late trading. The company slid 5.6% yesterday to $60.35 in New York. The shares of the company gained 13% last year whereas the 500 Restaurants Index of Standard & Poor dropped 2.6%.

Furthermore, profits will also decline this, excluding certain products. In a statement by the company, the decline is contrary to the estimated 10% growth. Per share, the profit was $3.25 and according to expert analysis, this year the estimated 2013 profit is $3.57 a share.

Yum! Is planning to woo back the Chinese customers by opening 700 new outlets this year. Locations open at least 12 months in China showed a decrease of 6% in the sales, this the first drop in three years. Analysts estimate a further 6% decline.

In 2011, 44% of revenue was collected from stores situated in China. But the sales got significantly affected after the government probe that showed that farmers used excessive amount of antibiotics on the poultry. In Jack Russo’s opinion, KFC will have to do all they can to restore their marred image. Although it will take time and money, the faith can be restored slowly.

The investigation by The Shanghai Food and Drug Administration ended on January 25^th and they did not bring up a case against Yum. Upon learning about the Liuhe Group’s use of higher levels of antibiotics than prescribed, Yum stopped all their association with the company.

The quarterly net income fell from $356 million or 75 cents per share to $337 million or 72 cents per share earlier in the year. As mentioned earlier, apart from a few items, the profit was 83 cents, analysts from estimated 82 cents.

Noteworthy is the rise in same-store sales; in US it rose 3%, in India 24% and in other international stores 3%. Whereas experts had estimated a growth of 3% for US, 6.3% for India and 3.9% for international locations.

Yum has been trying to compete with the rival McDonald’s Corp (NYSE:MCD) by advertising value items which are for a dollar of at an attractive price to lure conscious customers. Taco Bell similarly has promoted the 12-pak taco while Pizza Hut is promoting by offering $10 for any pizza and $19.99 for the big dinner box.

The revenue rose by 1%, analysts had estimated on an average $4.12 billion whereas the revenue was $4.15 billion in the quarter.

Nearly 38,200 restaurants worldwide are under Yum, out of which Yum owns 20% of them.

The shares of Yum! Brands Inc.(NYSE:YUM) were down by 2.74% and currently trading at $62.19