Yum! Brands, Inc. (NYSE:YUM) sales declined for the fourth straight quarter as the company continues to face difficulties in restoring its revenue in China following a food scandal last year. Its sales at Pizza Hut and KFC restaurants in China were hurt after a TV news story in July 2014 claimed that one of YUM’s supplier was making use of expired meat.
Safe food is a highly sensitive subject in China, where different scandals emerged on the surface in the past such as dirty food oil and toxic baby milk formula. Marketing experts say that regaining customers is a difficult task for a tainted brand.
The company’s same-store sales plummeted 10 percent in China in the second quarter, versus a decline of 8.40 percent estimated by analysts. Hedge fund Third Point LLC, which holds a stake in Yum, has suggested there is room for YUM to split off its business in China. Another stakeholder Corvex Management is also pushing for the same move.
Chief public affairs officer at YUM, Jonathan Blum said in an interview that the company is optimistic about China in the longer run and thinks the best step at the moment will be to regain the lost ground in the country.
The company is also facing troubles in the US as calorie-conscious Americans are preferring food perceived to be healthier. YUM reported a couple of months ago that it will remove artificial flavors and colors from food served in Taco Bell and Pizza Hut.
Yum said that its revenue for the second quarter slipped 3 percent to $3.11 billion in Q2 versus last year. Analysts surveyed by Thomson Reuters I/B/E/S were looking for a revenue of $3.19 billion. Net income plunged 30 percent to 53 cents per share. Adjusted earnings were 69 cents per share that topped analysts’ forecast of 62 cents per share.
