Pizza Hut weighs on Yum China growth

SHANGHAI/BENGALURU — Yum China Holdings Inc, the operator of KFC, Pizza Hut and Taco Bell in the world's second-largest economy, posted quarterly sales slightly below estimates.

This was due to sluggish growth at Pizza Hut amid a turnaround drive.

The firm, which spun off from Yum Brands Inc late last year, said same-store sales rose 3 percent in the second quarter of 2017, driven by a 4 percent jump at fried chicken chain KFC. Pizza Hut's same-store sales were flat.

Yum, China's biggest fast food chain with 7,685 outlets, has been looking to rev up growth in the market which has slowed since 2012, hit by food safety scares, changing consumer tastes and a wider economic slowdown.

The Pizza Hut division, which has been off-setting stronger growth at KFC since before Yum China's listing, fell short of analyst estimates of a 1.5 percent same-store sales rise, according to research firm Consensus Metrix.

Joey Wat, Yum China's president and chief operating officer, told analysts after the results that the pizza unit had been struggling and there were "quite a few key aspects of the fundamentals of the business that we have to fix".

"There is a still a long way to go to turn around Pizza Hut and we are working diligently to get things done," she said.

Jason Yu, general manager of Kantar Worldpanel China, said that in China, Pizza Hut, which targets middle-class families, has faced tremendous competition from high-end restaurants featuring healthy lifestyles or other unique characteristics. Lower-end fast food chains such as McDonald's have rolled out innovations to further enhance their market presence.

"Pizza Hut is caught in the middle," said Yu.

Agencies-China Daily