​Yum's earnings show it hasn't shaken China woes

LOUISVILLE, Ky. - Yum Brands (YUM) reported a loss for its fourth quarter as KFC sales in China continued plunging after a series of food supply issues.

Yum, which also owns Pizza Hut and Taco Bell, has been struggling to recover from a string of problems in China, a critical region that generates about half its total revenue.

The company said sales fell 16 percent at established locations in China during the quarter. In the previous quarter, the figure had declined 14 percent. While KFC's recovery efforts are taking longer than expected, CEO Greg Creed expressed confidence turnaround efforts would gain momentum in the second half of this year.

For the quarter, Yum said it lost $86 million, after reporting a profit of $321 million in the same period a year earlier.

The Louisville, Kentucky-based company said it had a loss of 20 cents per share. Adjusted one-time items, earnings were 61 cents per share. Analysts expected 66 cents per share, according to Zacks Investment Research.

Revenue for the period slipped 4.4 percent to $4 billion, but topped the $3.91 billion Wall Street expected.

Yum's latest Chinese troubles came this past summer, when an undercover TV report in China depicted what it said was improper food handling by a major restaurant chain supplier, a unit of OSI. Even though Yum said it got a limited number of products from the supplier, its reputation took a hit. Already, the company had been trying to repair its image after an earlier report said some suppliers were giving its chickens unapproved levels of antibiotics.

Yum spokesman Jonathan Blum said Wednesday the company is waiting for the Chinese government to release its findings on its investigation into this past summer's issues before making a decision on whether to take legal action against the supplier. Otherwise, he said Yum's team in China is focusing on menu innovation and value to win back customers.

"We need the gift of time," he said of the recovery effort.

Back in the U.S., Yum said Taco Bell sales rose 7 percent at established locations in the quarter. The increase was driven by the national rollout of the chain's breakfast menu, which is seeking to steal customers away from McDonald's (MCD) and others with offerings like a waffle taco and A.M. Crunchwrap.

Investors focused on the positives, pushing Yum shares up 1.1 percent, or 81 cents, to $74.46 in late trading.