Yum Brands to Leave a Bitter Taste Overseas

By Benzinga.com  JUL 10, 2012 12:15 PM

A slowdown in China could hurt the fast food giant.


In a move that surprised many, Yum Brands (YUM) did not report second quarter earnings yesterday as expected. The Taco Bell, KFC, and Pizza Hut restaurant company is likely to dish out decent results in the US on the upcoming July 18 call, while overseas numbers are anticipated to remain a concern.

Yum Brands and McDonald's (MCD) are just a few of the many well-known companies struggling in not only Europe, but in Asia as well. Overseas economic issues have been forcing the usually highly profitable eateries to come up with new plans for marketing and promotions in order to lure Chinese and European customers through the door.

No longer able to depend on their familiar buildings and wafting aromas, Yum Brands is expected to see the effects of China's weakened economy in its second quarter report. According to Investors.com, numbers will more than likely miss analyst expectations, raising cause for apprehension moving forward.

"Growth in China will be a concern for investors in Q2 as first-quarter sales in the world's most populous country were slower than expected. Same-restaurant sales grew 14%, missing analysts' lofty expectations. Yum's restaurant margin in China fell to 25.1% to 23.6% due to an increase in labor and commodity costs. Yum's sales in China are largely from KFC and Pizza Hut. An even bigger slowdown in China could have a huge impact on the company," Investors.com reported yesterday.

While this may not be Yum's most profitable quarter to date, it is certainly not for a lack of trying. As of late, promotional efforts and innovative menu items have been coming out one after another, with Taco Bell introducing the Doritos Loco tacos and the brand new Cantina Bell menu. Bringing in new chefs that appeal to health-conscious individuals could be just the thing to freshen up Yum's curdling reputation in Asia.

The company will report second quarter earnings next week on Wednesday.

Yum Brands closed Monday at $63.47, up around 7.5% year-to-date.

Editor's Note: This content was originally published on Benzinga.com by Katey Stapleton.

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