Karcher’s 1st-Quarter Profits Drop Sharply

Carl Karcher Enterprises Inc. reported an 82% drop in first-quarter earnings Friday, the fourth consecutive quarterly earnings decline for the Anaheim company, which owns the Carl’s Jr. fast-food chain.

Results for the fiscal 1986 first quarter ended May 17 showed net earnings of $811,000 compared to a profit of $4.5 million during the same period a year ago.

Sales were down only 3%, however, with revenues of $97 million compared to $100 million for the first quarter of fiscal 1985.

The plummeting profits were disclosed just a month after Carl’s Jr. launched a new advertising campaign to promote its decision to reduce the prices of all of its hamburger products.

“I was expecting a poor quarter” for Karcher, said Ward Lindenmayer, an analyst with S. G. Warburg in San Francisco. “But it was even poorer than I anticipated.”

“It’s not going to work instantly,” Lindenmayer said of the Carl’s Jr. back-to-basics campaign, which emphasizes hamburgers rather than new menu items.

“It’s going to be a slow grind, because of the competitive situation in the fast-food industry.”

Donald F. Karcher, president of Karcher Enterprises, noted in a prepared statement that the revised marketing and advertising campaign began May 9, one week before the quarter ended. “Initial results since the plan’s introduction, based on transaction counts, are encouraging,” he said.