According to the law firm press release, Yum describes itself as the world’s largest quick service restaurant company, which, through the three concepts of KFC, Pizza Hut and Taco Bell, develops, operates, franchises and licenses a worldwide system of restaurants. Yum’s business consists of four reporting segments: the China Division, the India Division, Yum! Restaurants International, and the United States Division.
The complaint alleges that during the Class Period, the defendants made materially false and misleading statements concerning the Company’s current and future business and financial condition. As a result of defendants’ false and misleading statements, Yum common stock traded at artificially inflated prices during the Class Period, reaching over $74 per share.
On November 23, 2012, reports in the Chinese media disclosed that certain of the Company’s chicken suppliers had been feeding toxic chemicals to chickens sold to KFC China. On November 29, 2012, the Company announced that its previous forecast of single-digit to flat China Division same-store sales growth would not be met, but instead, the Company expected to report China Division same-store sales of -4%. On these disclosures, Yum’s stock price fell nearly 9% to close at $67.08 per share on November 30, 2012.
On December 20 and 21, 2012, news reports began to circulate that the Company knew well before the Class Period that certain chicken suppliers in China had injected chickens with excessive antibiotics and other illegal chemicals but sought to conceal these facts. These disclosures caused Yum’s stock price to drop further to a close of $63.88 per share on December 21, 2012.
Then, on January 7, 2013, the Company filed a Form 8-K with the SEC updating its full year 2012 guidance for same-store sales for its China Division, stating that it was lowering its financial outlook due to publicity surrounding the Chinese government’s review of its poultry supply. As a result of the January 7, 2013 disclosures, on January 8, 2013, Yum shares dropped 5% from $67.89 per share to as low as $64.40 per share.
According to the complaint, the representations by defendants concerning the Company’s current business and financial condition were each materially false and misleading when made, because defendants failed to disclose the following true facts which were known to defendants or recklessly disregarded: (a) slowing economic trends in China were stronger than reported and could not support the forecasted sales results for the Company’s China Division nor the Company-wide increased earnings per share growth; (b) defendants knew but concealed that Yum’s own food safety inspections had already found that Chinese chicken supplier Shandong Liuhe Group (“Shandong Liuhe”) had sold the Company chickens with high levels of antibiotics and other illegal drugs and/or chemicals; and (c) the Company had continued to buy products from Shandong Liuhe until as late as August 2012.
On May 1, 2013, the Court issued an Order appointing lead plaintiff and approving the selection of Lead Counsel.
On May 3, 2013, this case was transferred from the Central District of California to the Western District of Kentucky.
On August 5, 2013, a Consolidated Complaint was filed.
On December 24, 2014, the Court issued an Order dismissing this case with prejudice. On January 16, 2015, the Lead Plaintiff filed a Notice appealing this decision.