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American Fast Food Giant Battered In China

Yum announced that its net profit decreased by 27% year-on-year to USD337 million in the first quarter of 2013, mainly attributing to the sales and profit decline in the Chinese market.

According to Yum, the parent company of Taco Bell, KFC and Pizza Hut, during the first quarter of 2013, its sales of individual stores in China decreased by 20%; while the sales of individual stores in America increased by 2%.

The report published by Yum said that due to the exposure of chicken supply chain quality problem in the fourth quarter of 2012 and the outburst of the new bird flu named H7N9, Yum China's performance was impacted. During the first quarter of 2013, its individual store sales in China decreased by 20%, of which KFC decreased by 24% and Pizza Hut decreased by 2%. With the sales decline, the company's profit in China decreased from 23.6% in the same period of 2012 to 16.6%. Meanwhile, its operating profit in China was USD154 million, a year-on-year decrease of 39.84%.

During the reporting period, Yum opened 226 new restaurants in China. The number of its traditional restaurants in China, excluding Little Sheep hotpot outlets, reached 5,480, representing a year-on-year increase of 18%. In addition, the acquired Little Sheep business brought positive influence, contributing four percentage points to sales and four percentage points to operating profit. The positive influence of exchange gains and losses also contributed USD2 million operating profit to the company.

In regards to its future performance in China, Yum said the bird flu brings severe impact to the sales of KFC, and its sales are expected to decrease by 30% in April 2013.

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