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China diners test McDonald's; food scare hurts KFC, Pizza Hut sales

Published on Jul 31, 2014 5:47 PM
 
A McDonald's restaurant logo is seen on July 24, 2014 in Shanghai. A food safety scare in China is testing local consumers' loyalty to foreign fast-food brands, including McDonald's Corp and Yum Brands Inc, which owns the KFC and Pizza Hut chains. -- PHOTO: AFP

BEIJING (Reuters) - A food safety scare in China is testing local consumers' loyalty to foreign fast-food brands, including McDonald's Corp and Yum Brands Inc, which owns the KFC and Pizza Hut chains.

Yum said on Wednesday that the scare, triggered by a TV report earlier this month showing improper meat handling by a supplier, Shanghai Husi Food, caused "significant, negative"damage to sales at KFC and Pizza Hut restaurants over the past 10 days. "If the significant sales impact is sustained, it will have a material effect on full-year earnings per share," Yum said in a regulatory filing.

Shares in Yum, which counts China as its No. 1 market, tumbled more than 6 percent in extended trading. The stock has dropped nearly 12 percent since Yum posted second-quarter earnings on July 17.

Officials from McDonald's in China and Hong Kong have not responded to requests for information on the impact on sales from the scandal, but McDonald's Holdings Co (Japan) Ltd on Tuesday scrapped its full-year earnings guidance after the China scare forced it to switch to alternative chicken supplies. A McDonald's Japan executive said sales had dropped 15-20 per cent on a daily basis due to the scare.

 
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