(Corrects net income increase in 11th paragraph to 48 percent)
By Lisa Baertlein
Oct 5 Yum Brands Inc on Wednesday posted
an unexpected decline in quarterly sales at established China
restaurants, citing protests sparked by an international court's
rejection of the country's claim to historic rights in the South
Shares in Yum, which will spin off its China restaurants on
Oct. 31, fell 2.2 percent to $86.71 in after-hours trading.
The owner of the KFC, Pizza Hut and Taco Bell brands said
sales at Yum China restaurants open at least one year fell 1
percent during the fiscal third quarter ended Sept. 3.
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 driver.
Sales at established restaurants in China were flat in the
second quarter after rising 6 percent in the first quarter, the
company said in a statement.
In July, an international tribunal in The Hague ruled in
favor of the Philippines in a landmark case, finding that China
had violated international law in the South China Sea.
Yum, the biggest Western restaurant operator in China, said
that ruling triggered regional protests against a few
multinational companies with well-known Western brands.
"If not for this event, we believe the China Division would
have delivered its fifth consecutive quarter of positive
same-store sales growth," Yum said. The impact dissipated
through August and September, it added.
Chinese investment firm Primavera Capital and an affiliate
of Alibaba Group Holding Ltd said in September they
would buy a stake in Yum China for $460 million.
Yum's China business will begin trading as a separate
company on Nov. 1 on the New York Stock Exchange under the
ticker symbol YUMC.
Yum's net income jumped 48 percent to $622 million, or $1.56
per share, helped by lower taxes, gains from selling restaurants
to franchisees, lower food and paper costs and other items.
Total revenue fell 3 percent to $3.32 billion for the third
The Pizza Hut division underperformed expectations, posting
a same-store sales decline of 1 percent. Taco Bell and KFC,
excluding China, beat estimates with growth of 3 percent and 4
(Reporting by Lisa Baertlein in Los Angeles; Editing by Richard