Yum! Brands (NYSE:YUM) fell in morning trades after the owner of Pizza Hut and KFC reported its fourth straight quarter of falling sales, indicating that the company is still struggling to regain lost ground in China after a food scandal last year.
Shares declined 2.7 percent to $89.12 at 9:50 a.m. in New York, paring this year’s gain to 22.6 percent.
Net income fell to$235 million, or $o.53 per share, in the quarter ended June 13, from $334 million, or $0.73 per share, a year earlier.
Excluding items, the company earned 0.69 per share, beating the average estimate of a profit of $0.62, according to Capital IQ data.
Revenue fell to $3.11 billion from $3.20 billion, below the Wall Street consensus of $3.19 billion. This marks the fourth straight quarter of revenue decline.
Yum also took a $68 million non-cash charge related to carrying down the value of real estate assets in Mexico.
Yum's same-store sales in China plunged 10 percent in the second quarter, much steeper than the 8.40 percent fall analysts had expected, according to research firm Consensus Metrix.
Globally, revenue fell 3 percent to $3.1bn in the three months to 13 June. The firm said its main initiative right now was to get back on track in China.
"The China division remains on track to open at least 700 new restaurants this year, laying the groundwork for future growth," chief executive officer Greg Creed in a statement late yesterday.
The group's KFC restaurants suffered in July last year after a television news story linked the brand to supplier Shanghai Husi Food, which was accused of selling old meat.
KFC, along with fast food giant McDonald's, stopped using meat from the supplier after its operations were suspended in July.
Adding to its China woes, customers in its home market - the US - are also shifting their eating habits to food seen to be healthier, served by competitors like Shake Shack and Chipotle Mexican Grill.
The company has been trying to win back customers with moves such as removing artificial colours and flavours from food at Pizza Hut and Taco Bell, it announced in May.
Looking ahead, the company reconfirmed its full year guidance of at least 10 percent earnings per share growth in 2015.