Boston, MA 10/08/2014 (wallstreetpr) – China food safety scare looks to have had a massive impact on Yum! Brands, Inc. (NYSE:YUM), which reported a 14% decline sales in the third quarter. Head of research at JL Warren Capital, Junheng LI, believes that investors will be extremely worried going forward as the dismal performance in sales is expected to persist.
Yum! Brands, Inc. (NYSE:YUM) has been forced to cut its full-year outlook as the food safety scare is expected to affect customer’s willingness to purchase products heading into the fourth quarter.
“Q3 is clearly not a good quarter but my concern now is Q4 doesn’t seem to improve much. We ran a pretty close online-offline survey on KFC China, which is the profit driver for Yum Brands global, and into September including the first week of October. We are seeing no visible bounce back recovery of KFC,” said Mrs. Li in an interview on CNBC.
Li rubbished claims that the resurgence of the U.S dollar could have had a negative impact on Yum Brand’s stock performance as the Japan Yen continued to perform dismally. Li argues that Yum! Brands, Inc. (NYSE:YUM) will not pay close attention to forex related matters heading into Q4 but essentially focus on how to bypass the food safety concerns.
Li also argues that a change to healthy-eating by the Chinese population should have a considerable impact on Yum Brand’s ability to ramp up sales in Q4.
“[…] Chinese consumers realized themselves there is a need to shift away from unhealthy perceived fast-food to a more healthy choices. From what we see on the ground by our weekly surveys, we don’t see a carrier rebound at all. My concern is the company guided down the whole year profits just might not be enough, “said Mrs. Li.
Yum! Brands, Inc. (NYSE:YUM) has been trying to upscale its restaurants as a way of making them less price-promotion driven. The company has already localized its menu as it tries to pay attention to healthy eating habits that customers are focusing on.
