China Not So Yummy


Take a look at YUM! Brands’ (YUM) swan dive yesterday on huge volume after they announced Q4 same store sales in China will be negative.

For the fourth quarter, stronger than expected operating performance from Yum! Restaurants International and our U.S. division is offsetting softer sales in China, where we now expect same-store sales to be negative as we overlap 21% same-store sales growth from last year. Full-year same-store sales growth in China is expected to be 6%. Next year will be another strong year for our China division, given this year’s record development of at least 800 new units and significant innovation in the pipeline, underpinned by world class operations. We are extremely confident Yum! China remains the best growth story in the restaurant industry.

We posted back in August,

Anyone who thinks the slowdown in China will not affect growth and corporate earnings in the U.S. and elsewhere is, well, should we say,  smoking crack.

Interestingly,  YUM! management cites the difficulty in beating comps after such a rapid period of growth and remains confident that China is their best growth market.   Let’s hope that is the case as many companies are betting on the rise of the Chinese consumer.

Could be why Apple was weak yesterday even after announcing the iPhone5 will start sales in China this month.   Idiotic since Apple has barely made a dent in the Chinese market so it doesn’t have the YUM! problem of beating huge comps.  We suspect the big pop comes when an agreement with China Mobile announced, expected to come early next year.

Then, again, maybe Apple just needs a little more time to consolidate its big bounce off $505 over the past two weeks.

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