Yum can't shake China troubles

October 9, 2013: 11:08 AM ET
china kfc
Sales at Yum's KFC stores continue to decline in China
HONG KONG (CNNMoney)

Yum Brands just can't catch a break, as waning China sales continue to drag down profit.

The restaurateur's third-quarter net profit tumbled 68% over the previous year to $152 million. Same-store sales in China fell 11%, led by a 13% decline at KFC.

The company's quarterly profit was significantly lower than the analyst consensus of $421 million, according to data compiled by S&P Capital IQ. Shares of the company dropped 7% in after-hours New York trading.

"Despite the disappointing third-quarter performance, I remain as confident as ever in our ability to deliver strong, sustainable growth in the years to come," said Yum (YUM) CEO David Novak.

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China sales have stumbled all year as the company, which also operates Taco Bell, continues to grapple with the fallout from a food safety scandal and fears over a new strain of bird flu. Same-store sales in China are expected to decline again in the fourth quarter of this year, according to a company statement.

China's great food dilemma

Yum has placed big bets on future growth in the world's second-largest economy. It operates more than 4,200 KFC restaurants in China, as well as about 800 Pizza Huts. In a bid to gain greater traction in China, the company last year acquired a local hot pot chain, Little Sheep, but those restaurants have "performed below expectations."

Related story: McDonald's to open in Vietnam

Despite its China woes, Yum continues to soldier on and has opened 458 new restaurants in the country so far this year.

Yum plans to open a total of 1,850 new restaurants this year outside the United States. For next year, the company sees earnings per share growth of 20%.

"Our business model remains compelling and we will continue to invest behind the enormous growth opportunities we see around the world," Novak said.

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