On Thursday quick-service restaurant operator Yum! Brands, Inc. (YUM) announced that they expect a drop in fourth-quarter revenue in China due to a weakening economy that will make it difficult to keep pace with previous growth.
The Louisville, Kentucky-based company, owner of KFC, Taco Bell, and Pizza Hut, thinks that its fourth quarter same restaurant sales in China will drop by -4%. In the third quarter of 2012 the company’s restaurants based in China accounted for more than half of Yum’s total revenue and profit.
China’s economic slowdown has also been affect Yum! competitors such as McDonalds (MCD). Yum! is the biggest Western restaurant operator in China, with more than 4,000 KFC shops and almost 740 Pizza Hut restaurants.
Yum Chairman and Chief Executive David Novak tried to make the best of the situation in a statement, “For the fourth quarter, stronger-than-expected operating performance from Yum Restaurants International and our U.S. division is offsetting softer sales in China.”
“Next year will be another strong year for our China division,” Novak said. “We are extremely confident Yum China remains the best growth story in the restaurant industry.”
Yum! shares are down $5.82, or -7.82%, in premarket trading on Friday.
The Bottom Line
Shares of Yum Brands (YUM) have a 1.80% dividend yield, based on last night’s closing stock price of $74.47. The stock has technical support in the $68-$70 price area. The shares are trading right near all-time highs.
Yum! Brands, Inc. (YUM) is not recommended at this time, holding a Dividend.com DARS™ Rating of 3.4 out of 5 stars.
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