Yum Q1 China same-store sales fall 20%, up in Feb.

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 March 11, 2013, 4:52 p.m. EDT

 http://www.marketwatch.com/story/yum-q1-china-same-store-sales-fall-20-up-in-feb-2013-03-11?siteid=bigcharts&dist=bigcharts

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By Debbie Cai

Yum Brands Inc. YUM +0.42% said same-store sales in its China division fell an estimated 20% in the first quarter, a smaller decline than it had previously projected, and also reported same-store sales rebounded in February.

Shares jumped 7.3% to $72.77 after hours. The stock is up 2.2% since the start of the year.

The parent company of Taco Bell, KFC and Pizza Hut had earlier projected the China segment to see a 25% same-store sales decline for the first quarter, which includes January and February results.

Sales at Yum's KFC stores open at least 12 months in China declined about 24% in the latest period, while same-store sales for Pizza Hut casual dining slipped about 2% in the quarter, the company said.

Yum's China business, which has been crucial for the company's growth, contributed 42% of the company's operating profit in 2012. Same-store sales in the country have softened in recent quarters as the country has shown signs of an economic slowdown. Rising food costs and wage inflation also have squeezed Yum's profit margins in the country.

The company is trying to win back customers to its KFC outlets in China after a probe of its chicken supply late last year resulted in a spate of negative publicity that caused sales to tumble. Yum is aiming to prevent food-safety problems by cutting its ties with suppliers that source their chicken from small farms that are hard to regulate, the chief executive of the China unit, Sam Su, told The Wall Street Journal two weeks ago.

Yum said February same-store sales growth was approximately 2% for the China Division, which included flat same-store sales at KFC and a 13% increase at Pizza Hut casual dining. The timing of Chinese New Year had a positive midteen impact on February same-store sales growth for both KFC and Pizza Hut Casual Dining, Yum said, offsetting a midteen decline in January. For the full quarter, the Chinese New Year impact to same-store sales growth was neutral, it said.

Meanwhile, the company's struggling U.S. business has enjoyed signs of a comeback, with same-store sales recently rising thanks in part to the successful launch of its Doritos Locos Tacos at Taco Bell.

Last month, the company said its fourth-quarter income slipped 5.3% although same-store sales continued to improve over the past few quarters.

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