Yum cuts 2014 profit forecast after food scare cuts China sales

Yum's same-store sales fell 14% in China in the third quarter due to a food safety scare

Yum Brands, the operator of KFC and other chains, has lowered its 2014 earnings forecast after same-store sales fell 14% in China in the third quarter due to a food safety scare. 

Sales in China, Yum's biggest market for revenue and profit, are expected to fall again in the fourth quarter at established restaurants on continued fallout from allegations that a former supplier used expired meat.
The company cut its forecast for full-year earnings per share growth to a range of 6-10% from its previous call for growth of at least 20%.


Sales at established KFC and Pizza Hut restaurants fell after a July 20 television news story in China alleged supplier Shanghai Husi was using meat past its expiration date.
Yum, which has nearly 6,420 restaurants in China, did not do significant business with Shanghai Husi and quickly cut ties with it and its parent, US meat supplier OSI Group.
But the scandal deterred Chinese consumers, whose confidence has been hit by a series of food safety problems.
Yum's sales at established restaurants in China had risen 15% in the second quarter and the country accounted for about 61% of its total sales in that period.
OSI and its affiliates are also major suppliers to McDonald's, which reported a 14.5% drop in August same-store sales for its unit that includes China.