Food safety authorities in Shanghai are investigating a meat wholesaler that supplies a Chinese restaurant chain with lamb. The Little Sheep restaurant chain is owned by Yum! Brands Inc. (NYSE: YUM), and the investigation centers around lamb that is improperly labeled.

According to a report in The Wall Street Journal, Yum! Brands has said that it does not purchase the brand of lamb being investigated in Shanghai. “After thorough examination, we’ve concluded that the merchant is not one of Little Sheep’s suppliers and does not match any of our purchasing records.”

Unfortunately for Yum! Brands, the company has made so many missteps in China in the past six months that no one is likely to believe that. Late last year the company’s KFC stores in China were hit with a tainted chicken charge, and just as that was drawing to a conclusion, a new strain of bird flu hit China.

In a story at yicai.com, an official with the investigation said (translation by Google Translate):

Little Sheep also part of the franchise, do not rule out Little Sheep franchise management is not strict enough …

Yum! Brands’ Chinese same-store sales fell by 20% in the first quarter, and oits perating profit in the country fell 41%. Yum! Brands has staked a lot on its Chinese operations, and the company has failed to execute. Of course, signing up as a sponsor of the Kentucky Derby was intended to sell Yum! Brands’ stock, not its fried chicken, and certainly not its lamb hot pot in China.

Shares of Yum! Brands are down about 2.3% in premarket trading this morning at $67.34 in a 52-week range of $59.68 to $74.75.

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