Yum cuts 2014 profit outlook as sales in China slow to recover from food scare

Yum Brands Inc. on Tuesday cut its profit outlook for the year because sales in China are recovering more slowly than the company expected after a food-safety scare.

Shares of the owner of the Taco Bell, KFC and Pizza Hut restaurant chains fell 5 per cent in extended trading.

Yum is trying to recover from a TV report this summer that showed one of its suppliers there allegedly using expired meat. The company noted it was hurt by the controversy even though it got a limited number of products from the supplier in question, a unit of OSI Group.

The restaurant operator said that its sales in China are not rebounding as quickly as expected. It anticipated that a key retail metric, revenue from stores open a year, will fall by a “mid-single-digit” in China this year.

As a result, it expects earnings per share for 2014 to grow by a “mid-single-digit” percentage — the second cut this year. Yum had initially forecast a 20 per cent gain for 2014 but in October lowered that to a 6 to 10 per cent gain.

Yum, which is based in Louisville, Kentucky, anticipates earnings per share growth of at least 10 per cent for 2015.

Shares fell $3.71 to $71.60 in after-hours trading. The stock has gained nearly 5 per cent over the past 12 months.