Here’s Why Yum! Brands is Spinning Off its China Division

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By Jacob Maslow

Yum! Brands (NYSE:YUM) recently announced that it will be spinning off its China division. Investors wondering why the company made this move need not look any further than the company’s November sales in China. Same-store sales for its China division dropped 3% during the month.

Yum! Brands is the parent company of several major fast food chains, including Pizza Hut, KFC and Taco Bell. For the month of November, the China division of KFC saw a 1% decline in sales, while sales at Pizza Hut tumbled 9%.

The sales for KFC were especially disappointing as the restaurant recently revamped its menu in late October. Pizza Hut also shifted its focus to offering value to discount-seeking customers.

Yum! Brand shares were down 4.8% on Thursday after announcing the disappointing results.

Initially, 2015 was shaping up to be a turnaround for Yum! Brand’s China division. September saw gains of 9%. October saw same-store gains of 5%, with KFC’s 10% jump leading the way. Pizza Hut sales were still struggling, however, dropping down 9%.

Pat Grismer, CFO of Yum! Brands, stated that next year will be a recovering reset year for the company’s China unit.

The company currently runs over 6,800 restaurants in China, but have faced a number of challenges over the last few quarters. The spinoff will allow Yum! Brands to refocus on its presence in China and hopefully, improve performance.

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