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Yum! Brands Inc. today reported system sales for its international division increased 6 percent prior to foreign currency conversion or 10 percent after conversion to U.S. dollars. As expected, system sales for its China division were down 5 percent versus last year prior to foreign currency conversion or down 4 percent after conversion to U.S. dollars. U.S. blended same-store sales at company restaurants increased 4 percent.
As Yum! previously announced, sales at KFC restaurants in mainland China were negatively impacted by adverse publicity relating to an isolated issue with a seasoning supplier. A coloring ingredient was included in a limited number of products that necessitated temporarily withdrawing those products from restaurants in that market. Yum! says the issue has been resolved and that the products have been returned to the menu. Sales in the company's mainland China Pizza Hut restaurants were not impacted.
As expected, China division Period 5 system sales were down 5 percent, consistent with the company's previous guidance of a 5 percent decline noted in its first-quarter earnings release dated April 20, 2005. Sales recovery from the low point in the last week of Period 4 has been slow but sure. Currently, it expects Period 6 system-sales growth to be flat versus last year and sales recovery to continue into the third quarter.
The company continues to expect to open at least 375 new restaurants for the full year 2005 in the China Division.