Submitted by Mark Hanna
Courtesy of MarketMontage. View original post here.
Copper, the Chinese stock market, and quite a few comments by global multinationals all confirm a Chinese slowdown. On the other hand “man made” Chinese statistics [Dec 7, 2010: WikiLeaks – Chinese GDP Figures are “Man Made”] are showing some minor rebound. The U.S. market and Wall St strategists are going for the rebound thesis so it will be interesting to see which way this plays out. Yum Brands (YUM) is the latest to confirm quite the slowdown in China as the prewarned last night on the year. The stock is down some 7-8% in premarket but more importantly is what it says for the broader Chinese consumer. To repeat what I’ve said in the past, aside from the Fed stepping in with methods never seen before, the 2009 bottom really was set by the Chinese and their massive stimulus plan (some 23% of GDP). With Europe in the dumps and U.S. in the “meh” economy, a 2013 without a strongly rebounding China is going to be an issue.
Via Reuters:
- Yum Brands Inc said on Thursday that it expects a decline in fourth-quarter sales at established restaurants in China, where a cooling economy is making it difficult to exceed the 21 percent gain it had there a year earlier. Yum, which saw more than half its total revenue and operating profit for the third quarter of 2012 come from China, said fourth-quarter same-restaurant sales there are expected to fall 4 percent.
- China’s slowdown was also affecting Yum’s rivals including McDonald’s Corp, Ajisen (China) Holdings, and Hop Hing Group Holdings Ltd, said Phoebe Tse, a Hong Kong-based analyst with Barclays. Ajisen is a Japanese-style noodle chain, while Hop Hing’s fast food unit has the franchise licenses for the Yoshinoya beef bowl and Dairy Queen icecream chains in northern China.
- “The slowing growth this year has been quite apparent in some first-tier cities,” she added, referring to major cities such as Shanghai, Beijing and Guangzhou.
- The last time Yum reported a decline in same-restaurant sales for China appears to have been in the fourth quarter of 2009, when those sales fell 3 percent in mainland China, according to Yum’s financial reports.
- There were signs of weakening during the third quarter of this year, when Yum’s same-restaurant sales were up 6 percent in China and a sales boost from menu price increases more than offset the impact of a 1 percent decline in customer visits.
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