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Yum China Surpasses Profit Estimates with Promising KFC Sales

| Feb 10, 2017 09:50 PM EST

A consumer buys food at a Kentucky Fried Chicken outlet in Beijing, China.

Chinese fast-food company Yum China Holdings Inc. posted a profit of 17 cents per share with the help of its growing KFC chain, which posted a 1 percent increase in same-store sales in the fourth quarter.

Yum China's KFC sales surpassed the 0.4 percent gain analysts had estimated. The company also operates the Pizza Hut and Taco Bell brands in China.

However, its Pizza Hut division performed worse than expected as local competitors gain market share. Pizza Hut declined 3 percent, missing the 2.3 percent growth projection. Combined, the company's sales were flat in the period.

The company's CEO Micky Pant noted that their top priority is consistently attaining increase in same-store sales, which expanded three percent at KFC but fell seven percent in its Pizza Hut operations.

Yum China's operating profit hit US$640 billion in China for 2016, increasing by 31 percent from its 2015 numbers when it operated as a unit of Yum Brands, its U.S. parent.

The results provided a respectable start from Yum China as an independent company in its inaugural quarterly results. It spun off from Yum Brands in October after three decades in China due to sluggish sales growth as middle-class consumers are increasingly drawn to upmarket dining experiences. KFC's China business was also rocked by a tainted meat scandal in 2014.

Yum China opened the country's first Taco Bell branch in Shanghai last month, with a menu adapted to local tastes.

The company has more than KFC 7,500 outlets in China by end of 2016 after adding 575 outlets last year with more than half of that number in the fourth quarter. It plans to add around 600 stores in the country yearly to keep it ahead of other U.S. chains in China.

McDonald's Corp is adding over 1,500 stores in China over the next five years, while Starbucks Corp plans to add 500 outlets annually.

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