Replies to post #6219 on The Rising Influence of Rising Affluence

[DewDiligence]

The timing was a little too perfect, LOL.

[DewDiligence]

YUM expects mid-single-digit comps and 700 new restaurants in China during 2013:

http://blogs.wsj.com/corporate-intelligence/2012/12/06/yum-brands-says-the-chinese-still-love-kfc/

Yum China executives said that high rent and labor costs in populous cities such as Shanghai have eaten into profits, so they will be focusing more of their growth on so-called “lower-tier” cities across the Mainland.

The company said it is boosting its round-the-clock offerings at KFC, it’s biggest chain in China, with expanded breakfast, lunch, dinner, late-night and delivery options and more “value” offerings. At its Pizza Hut restaurants, the company is providing free afternoon drink refills, which they say competes head-on with Starbucks. They’re also expanding the Pizza Hut menu beyond pizza to include broader offerings of both Western and Chinese food. For example, Pizza Huts in China will offer a new sizzling steak and are testing breakfast items.

“I believe in our China business model as much today as ever,” Mr. Novak said.

The -4% projected China comps in 4Q12 are likely an anomaly, but I’m still wary of a foreign restaurant chain that derives 2/3 of its overall operating profits from China. I may be making a mistake, but I haven’t used the recent selloff to buy in.

[DewDiligence]

YUM initially hid problem with China sales from investors:

http://online.wsj.com/article/SB10001424127887324442304578234261756463182.html

On Dec. 21, Yum told U.S. investors that a recent Chinese state media report on a government investigation of improper antibiotics use by its chicken suppliers was hurting its huge KFC business in China. The announcement sent Yum's struggling shares down further.

Within China, though, consumer concerns about the safety of KFC chicken had been circulating widely on the Internet for nearly a month, since a Nov. 23 Chinese news report raised similar concerns about the practices of a KFC supplier. Yum's China operation quickly rebutted those assertions, and defended its safety practices repeatedly on Chinese social media.

Yum alerted its U.S. shareholders at the end of November that it expected a 4% drop in its same-store sales in China in the fourth quarter—the first such decline since 2009. But in that Nov. 29 release—and in comments at an investor conference a week later—the company made no mention of Chinese consumer concerns, citing instead a wobbly economy and the difficulty of outperforming a strong quarter the year before. This week, Yum said the sales decline this quarter would be even worse than thought.