Karcher Earnings Drop as Firm Scraps Its Marketing
Trampled by ill-fated marketing plans that it only recently abandoned, Carl Karcher Enterprises Inc. said Monday its earnings dropped 35% in the fourth fiscal quarter to $1.4 million from $2.1 in the year-earlier period.
The Anaheim-based fast-food chain that owns and franchises 438 Carl’s Jr. restaurants in five states, also reported flat earnings of $11.6 million for its fiscal year ended Jan. 25, about par with $11.5 million in fiscal 1984.
But nearly $3.7 million of the company’s 1985 pretax net income came from sales of franchises, a one-time gain that most industry analysts discount when measuring a restaurant company’s operating results. Said Keith Mullins, analyst at New York-based Dean Witter Reynolds Inc., “On a purely operational basis, their earnings are substantially down.”
For the 12 weeks, Karcher’s revenues were $76 million compared to $71 million for the like period last year. For fiscal 1985, revenues were $335 million compared to $294 million last year.
While Karcher may be down, few analysts are counting the company out. In fact, industry experts credit Karcher executives for recognizing early on that the company was trying to do too much too fast. Barry M. Ziegler, analyst at New York-based Tucker, Anthony & R.L. Day, said he is confident in management’s ability to turn the company around. “The team was a winner in the past and I think they’ll have the character to win again.”
Mullins, of Dean Witter, agrees. “Carl Karcher can still pull this off. They are addressing the issues now. A year ago they weren’t,” he said.
There was little reaction to the company’s fourth-quarter results on Wall Street Monday. Karcher stock closed at just under $17.865, down just 38 cents in over-the-counter trading. Karcher’s chief financial officer Loren C. Pannier said, “These numbers are a non-event. We’ve told the financial community to expect this.”
Earlier this month, Karcher officials said the company was abandoning its goal to become a fast food operation with coffee-shop atmosphere. For two years, Karcher tried to ease into the niche by selling full dinners, serving meals at the table and raising prices.
To mastermind its new back-to-basics marketing drive, Karcher said Monday that it had hired Robert Wisely, 39, as its new vice president of marketing, a post that had been vacant for several months. Wisely, most recently a senior partner at Tustin-based Restaurant Research Associates, a food-service consulting firm, is a former Karcher employee.
Karcher’s Pannier said the company will plow ahead with franchising plans in fiscal 1986, and intends to open 15 to 20 new franchises this year.
