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Yum’s China Sales Slump 29% in April on Chicken Safety Concern

May 11 (Bloomberg) -- Yum! Brands Inc., owner of the KFC and Pizza Hut dining chains, said sales at stores open at least 12 months fell 29 percent in China in April as customers remained concerned about the safety of its chicken and the spread of bird flu hurt demand.

Analysts projected a 27 percent drop, the average of five estimates compiled by researcher Consensus Metrix. Sales dropped 36 percent at KFC while gaining 5 percent at Pizza Hut, the Louisville, Kentucky-based company said in a filing with the U.S. Securities and Exchange Commission yesterday. Yum’s same-store sales fell 13 percent in March in the Asian nation.

Chief Executive Officer David Novak has been trying to reassure consumers and revive sales in China after a former supplier was investigated for selling chicken with too much antibiotics. The restaurant company, which last year got 51 percent of its revenue from China, is now facing a deadly outbreak of bird flu in the Asian nation.

“Publicity surrounding Avian flu in China has had a significant, negative impact on KFC sales,” Yum said in the filing. “Historically, the impact of this publicity has initially been dramatic at KFC but relatively short-lived.”

Yum fell as much as 2.5 percent in extended trading in New York yesterday, after closing up 1.2 percent at $70.36. The shares have gained 6 percent this year, while the Standard & Poor’s 500 Restaurants Index climbed 14 percent.

‘Operation Thunder’

In April, Yum reiterated its forecast for a “mid-single digit” decline for 2013 profit excluding certain items.

Yum, which has more than 5,400 locations in China, has been trying to boost sales with a marketing campaign dubbed “Operation Thunder” after its supply chain was investigated. The owner of Pizza Hut has also pledged to improve food safety and tighten standards for its suppliers in the Asian nation.

“We continue to remind consumers that properly cooked chicken is perfectly safe to eat,” Novak said in a statement on April 23 after the company reported first-quarter earnings.

Earlier this week, McDonald’s Corp. reported that same-store sales in its Asia-Pacific region fell 2.9 percent in April. The decline was partially due to the Avian flu in China, the Oak Brook, Illinois-based company said in a statement.

Same, or comparable, store sales are an indicator of a company’s growth because they include only older, established locations.

Yum has about 39,000 restaurants globally.

To contact the reporter on this story: Leslie Patton in Chicago at lpatton5@bloomberg.net

To contact the editor responsible for this story: Robin Ajello at rajello@bloomberg.net

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