A food safety scare in China is testing local consumers’ loyalty to foreign fast-food brands, including McDonald’s Corp and Yum Brands Inc, which owns the KFC and Pizza Hut chains.
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Yum said on Wednesday that the scare, triggered by a TV report earlier this month showing improper meat handling by a supplier, Shanghai Husi Food, caused “significant, negative” damage to sales at KFC and Pizza Hut restaurants over the past 10 days. “If the significant sales impact is sustained, it will have a material effect on full-year earnings per share,” Yum said in a regulatory filing.

Shares in Yum, which counts China as its No. 1 market, tumbled nearly 7 percent on Thursday.