UPDATE 1-Yum China sales fall 29 percent in April

Sat May 11, 2013 2:18am IST

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May 10 (Reuters) - KFC parent Yum Brands Inc reported on Friday an estimated 29 percent drop in April sales at established restaurants in China, where a bird flu outbreak is pummeling sales that were recovering from an earlier food safety scare.

The result from China, where the fast-food restaurant operator reaps more than half of its overall sales, was roughly in-line with expectations.

In late April, Yum said China sales could be down about 30 percent for the month. Five analysts polled by Consensus Metrix expected them to fall 27 percent.

Yum shares, which closed at a five-week high of $70.36 before the China sales report dropped, slipped 1.2 percent to $69.50 in after-hours trading.

Demand for poultry products - including fried chicken sold by KFC - took a big hit in early April as news of the novel bird flu strain, the H7N9 virus, made headlines. Currently, that flu has killed more than 30 people.

Most of Yum's nearly 5,300 restaurants in China are KFCs.

The bird flu outbreak has hobbled the company's effort to revive sales in China, where restaurant sales tumbled after a highly publicized report in mid-December highlighted excessive levels of antibiotics in chicken from two of Yum's suppliers. Yum was not fined by food safety authorities, but it suffered a widespread backlash in the mainstream media and on Weibo, the China equivalent of popular U.S. social media site Twitter.

The company, which is tightening up its supply chain and bolstering its social media presence in China, saw sales at established restaurants there fall 20 percent during the first quarter.

Separately, Yum's roughly 450 Little Sheep hot pot restaurants in China were caught up in a recent official report on fake mutton. Yum said the mutton allegations were untrue and the Shanghai Municipal Food Safety Committee said on Thursday that, while investigations were ongoing, there was currently no evidence Yum's Little Sheep hotpot chain had used fake mutton.

Kentucky-based Yum bought a controlling interest in Little Sheep in February 2012 and now owns 93 percent of the chain.

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