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Yum! Brands (YUM) and the Danger of Unhappy Chinese Consumers
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On July 12th, an international tribunal in Hague decided that China’s claim to sovereignty in the South China Sea had no legal basis. China refused to take part in any of the proceedings in the tribunal, and has stated their lack of intent to accept the decision that it has reached.
Although the tribunal case was initiated by the Philippines, the country’s strong ties to the U.S. coupled with the U.S.’s call for China to respect the ruling appears to have angered both the Chinese state media as well as its consumers.
In response the ruling, protests have sprung up in cities across the country. According to Sohu News, a Chinese online news outlet, Yum! Brands (YUM - Free Report) owned KFC restaurants were the target of protests and boycotts in about a dozen cities.
It seems KFC is not the only target; pictures and videos of Chinese protestors smashing their Apple (AAPL - Free Report) iPhones have appeared all over Sina Corp. social media website Weibo as well.
An extended boycott against KFC has the potential to pose danger for Yum. As highlighted in our recent earnings report, a higher than expected same-store sales growth of 3% helped drive their earnings beat. Yum has gone four consecutive quarters with positive same-store sales growth in China, where it opened 72 restaurants in Q2 and has an overall larger presence than in the U.S.
This is not China’s first consumer boycott, with consumers having previously protested against Japanese and French products in recent history as a response to various ideological conflicts.
There is currently an 83% agreement amongst analysts in upward earnings estimate revisions for Q3 following their beat, with current estimates standing at $1.10 in earnings per share, up from $1.07 just 7 days ago. Estimates on the year are up as well, currently at $3.69 compared to $3.67 7 days ago and $3.64 60 days ago.
In May, it was reported that Yum was in talks with private equity firms on spinning off some of its China operations after a difficult few years; however, that too could change with time. Although these boycotts are generally short-lived, they are worth keeping an eye on in the near future.
Yum! Brands currently sits at a Zacks Rank #3 (Hold).
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Yum! Brands (YUM) and the Danger of Unhappy Chinese Consumers
On July 12th, an international tribunal in Hague decided that China’s claim to sovereignty in the South China Sea had no legal basis. China refused to take part in any of the proceedings in the tribunal, and has stated their lack of intent to accept the decision that it has reached.
Although the tribunal case was initiated by the Philippines, the country’s strong ties to the U.S. coupled with the U.S.’s call for China to respect the ruling appears to have angered both the Chinese state media as well as its consumers.
In response the ruling, protests have sprung up in cities across the country. According to Sohu News, a Chinese online news outlet, Yum! Brands (YUM - Free Report) owned KFC restaurants were the target of protests and boycotts in about a dozen cities.
It seems KFC is not the only target; pictures and videos of Chinese protestors smashing their Apple (AAPL - Free Report) iPhones have appeared all over Sina Corp. social media website Weibo as well.
An extended boycott against KFC has the potential to pose danger for Yum. As highlighted in our recent earnings report, a higher than expected same-store sales growth of 3% helped drive their earnings beat. Yum has gone four consecutive quarters with positive same-store sales growth in China, where it opened 72 restaurants in Q2 and has an overall larger presence than in the U.S.
This is not China’s first consumer boycott, with consumers having previously protested against Japanese and French products in recent history as a response to various ideological conflicts.
There is currently an 83% agreement amongst analysts in upward earnings estimate revisions for Q3 following their beat, with current estimates standing at $1.10 in earnings per share, up from $1.07 just 7 days ago. Estimates on the year are up as well, currently at $3.69 compared to $3.67 7 days ago and $3.64 60 days ago.
In May, it was reported that Yum was in talks with private equity firms on spinning off some of its China operations after a difficult few years; however, that too could change with time. Although these boycotts are generally short-lived, they are worth keeping an eye on in the near future.
Yum! Brands currently sits at a Zacks Rank #3 (Hold).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>