Yum China sales up in Feb amid turnaround

KFC parent Yum Brands Inc on Monday reported an unexpected 2 percent rise in February sales at established restaurants in China, after Chinese New Year boosted sales in its top market that has been hit hard by a food safety scare.

Shares in Yum jumped 6 percent in extended trading to $71.86, their highest level since November, after the results were far better than the estimated 8.7 percent drop expected by three analysts polled by Consensus Metrix.

Yum also reported a 20 percent decline in first-quarter same-restaurant sales for China, which was less steep than its prior forecast for a 25 percent drop.

The February results included flat same-restaurant sales at KFC and 13 percent growth at Pizza Hut Casual Dining.

Chinese New Year increased Yum China's February results in the mid-teen percentages, offsetting a similar hit in January, Yum said in a statement. As a result, the overall impact of the holiday was neutral for the first quarter, which includes only January and February.

The fast-food operator reaps more than half of its overall sales in China, where most of its nearly 5,300 restaurants are KFCs. It does not normally report monthly China sales results, but is doing so while it works to turn that business around.

Yum China's January same-restaurant sales fell 37 percent, including a 41 percent fall at KFC and a 15 percent decline at Pizza Hut Casual Dining.

Yum last month said it expected KFC same-store sales in China to turn up by the fourth quarter.

The February results "would seem to imply that the recovery is potentially going to be faster than what we thought," Bernstein Research analyst Sara Senatore said.

Diners in China started cutting back on visits to Yum's restaurants in December after news reports and government investigations focused on chemical residue found in a small portion of its chicken supply.

Yum was not fined by food safety authorities.

The company has apologized for the chicken incident, vowed to end ties with smaller poultry suppliers that have not modernized their operations and pledged to further tighten its food safety procedures.

"I do think they've said all the right things so far. It's just going to take some time for consumers to get over the negative perception," Morningstar analyst R.J. Hottovy said.

A new Reuters analysts of KFC comments on Weibo - China's version of a social media site - showed that customer anger appears to be easing.