Yum Brands falls on China worries

AP News
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Posted: Jun 08, 2012 1:55 PM
Yum Brands falls on China worries

Shares of Yum Brands Inc. fell 4 percent on Friday, weighed down by investor fear sparked by a lower-than-expected monthly sales report from McDonald's that seemed to indicate growth in China may be slowing.

Yum Brands operates KFC, Taco Bell and other fast-food chains and has been expanding heavily overseas. Analysts estimate that Yum Brands draws more than half its profit from China. Many companies have focused on China for growth as the country has a growing class of consumers entering the middle class. But China's economy is also volatile, and could be hit hard if the global economy sinks into a recession.

Yum's stock was among the biggest decliners in the Standard & Poor's 500, an index of 500 large-cap stocks that is considered a good measure of how the U.S. economy is doing

McDonald's Corp. reported early Friday that strength in the U.S. and Europe drove up a key revenue figure in May, but warned that economic volatility around the world, including China, and rising expenses are pressuring its second-quarter results.

The world's largest fast-food chain said sales in the Asia-Pacific, Middle East and Africa region fell 1.7 percent in May from a year ago. Positive results in Australia were more than offset by negative results in Japan and, to a lesser extent, China, McDonald's said.

McDonald's report follows Monday's downgrade of Yum by a Raymond James analyst, who said the once highly-valued restaurant chain's stock may have already hit its peak and that the company faces a risky future ahead in China.

Yum Brands, based in Louisville, Ky., did not immediately return a request for comment.

Yum Brands shares fell $3.33, or 5 percent, to $63.44 in midday trading. The stock had risen 13 percent since the beginning of the year.