Yum posts unexpected fall in revenue as KFC, Pizza Hut struggle

Wed Feb 3, 2016 7:16pm EST
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By Subrat Patnaik

(Reuters) - Yum Brands Inc (YUM.N: Quote) reported an unexpected drop in fourth-quarter revenue as both its KFC and Pizza Hut restaurant outlets struggled to grow, hurt in part by the strong dollar.

The company, which is spinning off its China business this year, said total revenue fell to $3.95 billion in the quarter ended Dec. 26, from nearly $4 billion a year earlier.

Analysts on average were expecting sales to rise to $4.02 billion, according to Thomson Reuters I/B/E/S.

The company's shares dipped 1.4 percent to $71.45 in extended trading on Wednesday.

Yum Brands gets about half its sales from China. But that business has been besieged by food scandals and marketing missteps for the past two years, while the company also faces tough competition from nimbler rivals in the United States.

The company's sales at established restaurants in China rose 2 percent, increasing for only the second time in six quarters. It was also marginally higher than analysts' estimates of a 1.9 percent increase, according to research firm Consensus Metrix.

The increase in KFC's and Pizza Hut's system sales in the fourth quarter was the same as in the third quarter – up 6 percent at KFC and 2 percent at Pizza Hut.

But, Conlumino analyst Hakon Helgesen said KFC system sales fell 5 percent in the latest quarter, including the effect of a strong dollar, while Pizza Hut system sales declined 2 percent.   Continued...

A man walks past a logo of KFC, outside a restaurant in Shanghai, China, July 30, 2015. REUTERS/Aly Song