Yum China: no brand damage from protests over South China Sea ruling

Thu Oct 6, 2016 1:49pm EDT
 
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By Lisa Baertlein

LOS ANGELES (Reuters) - Yum Brands Inc (YUM.N: Quote) said on Thursday its KFC and Pizza Hut businesses in China suffered no lasting brand damage after political tensions over the South China Sea caused an unexpected third-quarter sales drop in that country.

The company, which will spin off its China business on Oct. 31, said the last quarter started well there, but its restaurants were hit by anti-U.S. protests after an international court in July rejected China's claim to historic rights in the South China Sea.

Yum Brands on Wednesday reported a surprise 1 percent drop in third-quarter sales at China restaurants open at least one year. The protests reduced the measure by as much as 500 basis points, but the impact has largely eased, executives said on a conference call on Thursday.

Analysts polled by research firm Consensus Metrix had expected a 4.1 percent sales gain for the China unit, which is Yum's top profit generator.

For the China unit's current quarter that started on Sept. 1, same-store sales so far are down "modestly" but are expected to be positive for the balance of the quarter, Yum Brands Chief Executive Greg Creed said.

Company research indicated that the protests inflicted "no damage whatsoever to the brand," Micky Pant, CEO of Yum Restaurants China, said.

An international tribunal in the Hague said in July it found no legal basis for China's claim to most of the South China Sea. This prompted local media to call the court a "puppet" of external forces and accuse the United States of turning the Philippines, which filed the case, against China.

Several brands became lightning rods for short-lived anti-U.S. protests and boycott calls, including Apple Inc (AAPL.O: Quote) and KFC, which has more than 5,000 restaurants across China.   Continued...

 
FILE PHOTO --  Logos of KFC, owned by Yum Brands Inc, are seen on its delivery bicycles in front of its restaurant in Beijing February 25, 2013.  REUTERS/Kim Kyung-Hoon/File Photo