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Some Good News for Yum Brands in China

November 12, 2015

TIANJIN, CHINA - 2015/02/21: A KFC restaurant hangs up China's national flags in lunar new year.  KFC restaurants in China will start selling freshly ground coffee in 2015 to become a lower-cost “premium” alternative to Starbucks. The initiative began earlier this year and is expected to perform in 2,500 KFCs in China by the end of this year. (Photo by Zhang Peng/LightRocket via Getty Images)TIANJIN, CHINA - 2015/02/21: A KFC restaurant hangs up China's national flags in lunar new year.  KFC restaurants in China will start selling freshly ground coffee in 2015 to become a lower-cost “premium” alternative to Starbucks. The initiative began earlier this year and is expected to perform in 2,500 KFCs in China by the end of this year. (Photo by Zhang Peng/LightRocket via Getty Images)
A KFC restaurant hangs up China's national flags in lunar new year.Photograph by Zhang Peng — Getty Images

Yum Brands(YUM), which is spinning off its dominant China business, said October sales at established restaurants in the country rose 5% and backed its same-store sales forecast for the fourth quarter.

The company said the results included an estimated 10% growth in same-store sales at KFC and a 9% drop at Pizza Hut.

Yum’s 6,900-restaurant China division is the core driver of its business, contributing 54% of overall operating profit in the latest third quarter.

Shares of the parent company of the KFC, Pizza Hut and Taco Bell chains were down nearly 2% at $67.11 in extended trading.

Yum on Oct. 15 warned investors that its results from China would continue to be volatile and said the division’s same-restaurant sales could be flat to up 4% for the fourth quarter on gains at KFC and declines at Pizza Hut Casual Dining.

Same-store sales remain difficult to forecast in China, the company added.

Yum’s China sales at established restaurants have swooned in four of the last five quarters as the company grapples with the country’s persistent food safety issues, increased local competition and a cool down in what is still the world’s fastest-growing major economy.