China still a bright spot for Yum group

Revamped product lineups and improved store designs in China helped Yum Brands Inc, the parent company of KFC, Taco Bell and Pizza Hut, post a strong recovery in sales and profit, during the second quarter of the year.

The fast-food giant said sales at its outlets in China grew by 21 percent in the second quarter along with a 15 percent growth in same-store sales. Restaurant margins increased by 6.2 percentage points to 16.8 percent and operating profit by 188 percent. The company said it opened 104 new restaurants in China so far this year.

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"We are especially pleased with the initial success of our KFC Menu Revamp and excited about our plans for the rest of the year. Overall, we remain on track to open at least 700 new restaurants in China as we further capitalize on the world's largest and fastest growing consuming market," Yum said in a statement.

Sales grew 25 percent for KFC and 16 percent for Pizza Hut Casual Dining. Same - store sales grew 15 percent, including growth of 21 percent at KFC, while Pizza Hut reported flat sales.

Worldwide, its KFC division sales increased by 5 percent while Pizza Hut reported a 1 percent fall in sales.

Yum has seen its fortunes fluctuate in China after market share dipped to 5 percent in 2013 from 6.4 percent in 2012.

Despite Yum's market dominance, its competitors, including McDonald's Corp and Ting Hsin International Group, improved market share by 0.2 percentage point during the same period.

McDonald's, the global leader among fast-food chains, has lagged behind KFC in the number of stores it has in China. Industry experts consider its plan to expand in China through franchises to have missed the boat.

Ben Cavender, an analyst at the Shanghai-based China Market Research, said Yum has taken some steps to improve its sales including efforts to make its menu more efficient and easier to order from.

Yum has revamped the layout of its stores to attract more younger consumers and plans to offer better Wi-Fi and mobile experiences at its outlets. But compared with the same quarter last year, it is still not as strong as it should be in terms of performance due to persisting problems, said Cavender.