Fast Food Shares Down On China Chicken Supplier Scare

Fast food companies with exposure in China trended down Thursday after Yum! Brands (NYSE: YUM) said a chicken supplier in its China market is under investigation for improper food-handling practices.

The issue resulted in a "significant, negative impact to same-store sales at both KFC and Pizza Hut in China over the past 10 days," Yum said in a filing Wednesday with the Securities and Exchange Commission.

For the same reason, McDonald's Japan on Tuesday said it won't meet its 2014 sales targets and cannot offer a current estimate. McDonald's Japan trades separately from McDonald's (NYSE: MCD).

The supplier, OSI unit Shanghai Husi, which counts both McDonald's and Yum among its customers, was shown in a Chinese television report earlier this month improperly handling food, and Shanghai's Food and Drug Administration subsequently launched an investigation.

If the sales impact is sustained, "it will have a material effect on full-year earning," Yum said.

Yum recently traded down 5.2 percent; Papa John's Int'l (NASDAQ: PZZA) dropped 2.25 percent; Country Style Cookng Restaurant Chain (NYSE: CCSC) declined 1.4 percent and Popeye's Louisiana Kitchen (NASDAQ: PLKI) fell one percent.