KFC Owner Yum Hurt By China Food 'Scares'

Profits at KFC's parent company Yum Brands fell 68% in the third quarter as it continues to endure the effects of a series of controversies surrounding food in China.

Shares fell more than 7% in after-hours trading when the firm warned it would take some time to rebuild sales in China - its most important growth market - following an 11% fall in like-for-like sales over the period.

China accounts for more than 40% of Yum's operating profit but sales at its restaurants began nose-diving after a TV report late last year which said some of the company's suppliers were giving chickens unapproved levels of antibiotics.

A few months later, the chain's recovery efforts were derailed by a bird flu scare.

It also announced a writedown of £258m (£161m) on its Little Sheep business in China, which suffered from bad publicity over lamb quality issues which were later dismissed by food safety regulators.

The Kentucky-based company, which also owns Taco Bell and Pizza Hut, cut its full-year outlook as a result of the continuing issues.

Chief executive David Novak said: "Even with our recent challenges, KFC is unquestionably the category leader in China and we remain confident sales will fully recover from the adverse publicity surrounding the December poultry supply incident."

The sluggish economy has forced fast-food chains worldwide to focus on dangling discounts and deals to attract customers, a strategy that pressures profit margins.

Yum said its profits for the quarter ending September 7 fell to $152m (£95m) compared to $471m (£294m) last year.

It is planning an "aggressive" marketing campaign to arrest the slide in Chinese revenues, the company said.

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