Yum Brands Falls 5% After Guidance Cut
Shares of Yum! Brands (NYSE: YUM) fell a little more than five percent in Monday's after hours trading session after the company cut its fourth-quarter sales and fiscal 2012 earnings outlook.
Yum! cited the “adverse publicity associated with a government review of China poultry supply - and the corresponding significant impact on KFC China sales during the last two weeks of December.”
The company said that it sees same-store sales falling six percent in Q4 for its China division, which compares to its previous outlook calling for a decline of four percent. The company is expected to release its fourth-quarter earnings results on February 4.
For the full-year 2012, Yum! said that it now sees adjusted earnings per share of $3.24. This compares to current consensus estimates of $3.26.
In December, food regulators in China said that certain samples of the company's chicken contained unusually high levels of antibiotics. This in turn caused a consumer and media backlash against KFC in the country.
The report from the Shanghai Food and Drug Administration (SFDA) showed that eight of 19 batches of chicken samples that Yum! Brands sent to a testing laboratory in 2010 and 2011 violated government standards.
The poultry which was found to contain the unusually high antibiotic levels was supplied by Liuhe Group Co. Yum! said that it stopped purchasing poultry from the company in August.
Yum! has defended the quality of its food and the SFDA responded to criticism in state-run media against the company by saying that other samples complied with government limits on antibiotics.
The agency, however, is planning on conducting further investigations into possible food-safety violations by Yum! Brands in China.
In addition to KFC, Yum! also is the owner of the Taco Bell and Pizza Hut restaurant concepts.
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