Yum says China business gaining momentum

A customer walks out of a KFC restaurant in Shanghai, China, October 9, 2015.[Photo/Agencies]

Yum Brands Inc－which owns the KFC, Taco Bell and Pizza Hut brands－said on Wednesday its China business was gaining momentum, boosting its shares as it prepares to spin off its key Chinese unit in the fall.

"Our China division is off to a good start in the third quarter for both KFC and Pizza Hut Casual Dining, including a return to positive same-store sales at Pizza Hut Casual Dining in recent weeks," according to Chief Executive Greg Creed.

China KFC restaurants, the majority of the 7,246 stores in the division, had a 3 percent rise in same-store sales in the second quarter, while the smaller and more upscale Pizza Hut Casual Dining chain posted a drop of 11 percent.

Analysts had expected a 3 percent gain at KFC China and a 7.8 percent drop at Pizza Hut China.

Overall sales at China restaurants open at least one year were up 6 percent in the first quarter of this year, following a rise of 2 percent in both the third and fourth quarters of last year.

Yum's business has stabilized in the past 12 months as it invested to rebuild consumers' confidence in food quality, according to Jason Yu, general manager of Kantar Worldpanel China. At the same time they have launched more digital marketing activities to enhance interaction with younger consumers, said Yu.

However, long-term challenges still face the business as the Chinese population is aging and consumers are looking for upgraded food choices, he said. It needs to compete with other fast-food restaurants to attract more younger consumers and adopt a more innovative approach.

Yum bowed to activist-investor pressure in October and agreed to separate its China business from its US operations. McDonald's China said it was on the lookout for strategic investment partners in the Chinese mainland to help it open 1,000 restaurants by 2020.

Bloomberg contributed to this story.