Karcher Posts 1st Profit Gain in 4 Quarters : But Much Is Due to Sale of Some of Its Outlets

After struggling through four consecutive quarters of declining profits, Carl Karcher Enterprises Inc. reported a 7.7% quarterly increase in net income Tuesday.

The company reported net income of $1.54 million for the third quarter of fiscal 1986, ended Nov. 1, compared to net income of $1.43 million during the year-ago period. In the latest period, income was boosted by a $311,000 gain from tax benefits.

Pretax income dropped 20.7% in the quarter to $1.23 million from $1.55 million in the year-ago period. And revenues fell 3% year to year, to $75 million from $77 million.

“They still have a ways to go to get their day-to-day operations back in order,” said Dennis Forst, analyst at Seidler Amdec Securities Inc. of Los Angeles. “It looks to me like a lot of the company’s income has come from the sale of units.”

Indeed, the company gained $1.8 million on the sale of company-owned restaurants to franchisees during the third quarter, said Loren Pannier, group vice president of the Anaheim fast-food chain.

But the sale of company-owned stores outside California to franchisees is part of a long-term strategy, “not just a quarterly occurrence,” Pannier said.

For more than a year, the company has undergone a “back to basics” campaign. The campaign is an attempt to bring back thousands of customers that the company lost last year when it introduced a slew of unsuccessful products, raised prices and franchised outside of its core California market.

For the nine months, net income dropped 62.5%, to $3.85 million from $10.26 million a year earlier. Also during the 40-week period, revenues fell 3.7%, to $249 million from $259 million.