Yum Brands (NYSE:YUM), parent of KFC, has hit a slowdown in sales in China. Yum's quarterly profits fell in the last reported period, and it was overseas sales that got dinged the most.
According to Reuters, "Probably it's the (same-store sales comparison) in China that's spooking people ... I think analysts had expected probably a little higher number," said Edward Jones analyst Jack Russo.
China has been the land of infinite growth for many American companies that have hit slower growth in the U.S., often because of high market penetration there. KFC may believe that it cannot open more stores in its home market without taking business away from its existing store. The size of the Chinese market is big enough so the the chicken food retailer should be able to keep setting up new locations for years.
But the economic downturn is starting to hit China and its middle class hard. Exports are way down because of a recession that has slowed growth for trading partners of the most populated country in the world.
Will the fast food problem in China spread to McDonald's (NYSE:MCD)? Why not? The company is not immune to market conditions. Because of its popular brand it may do better than its competitors, but it can't defy gravity.
Douglas A. McIntyre is an editor at 24/7 Wall St.
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