Yum! Brands, Inc. (YUM) reported after hours on Monday that sales growth in China will be much lower than expected in the fourth quarter.
The owner and operator of KFC, Pizza Hut, and Taco Bell, filed to the SEC a report that said sales at existing Chinese stores are expected to drop by 6% in the fourth quarter. Reasons for the slowdown are partially due to recent publicity of safety concerns of Chinese poultry supply and an overall macroeconomic slowdown in China.
Yum! had warned in 2012 that fourth quarter same store sales would slow down, however, the decline is more severe than previously thought. Last year, the company saw sales in China grow by 21% which is a very difficult number to duplicate.
Performance in China is very important to Yum as it has placed a lot of resources into entering the world’s second largest economy. The company operates more than 4,000 KFC stores and 750 Pizza Huts in China, with plans to open hundreds more.
Yum! shares were down $2.89, or -4.26%, during premarket trading on Tuesday. The stock is up +13.43% over the past year.
The Bottom Line
Shares of Yum Brands (YUM) have a 1.97% dividend yield, based on last night’s closing stock price of $67.89. The stock has technical support in the $62-$64 price area. If the shares can firm up, we see overhead resistance around the $70-$72 price levels.
Yum! Brands, Inc. (YUM) is not recommended at this time, holding a Dividend.com DARS™ Rating of 3.4 out of 5 stars.