Annual Earnings Double at Karcher Enterprises
Carl Karcher Enterprises Inc., operator of the Carl’s Jr. hamburger chain, reported Thursday that its earnings more than doubled last year despite the recession and fierce competition in the California fast-food market.
Anaheim-based Karcher reported net income of $13 million for its fiscal year ended Jan. 28, up 132% from $5.6 million for the previous year. Revenue was $521.8 million, up 2% from $511.3 million.
Company President Donald F. Karcher said the company’s profits would have been higher except for the recession, deep discounting and concern about war in the Middle East.
Donald Karcher, however, expressed mild optimism about the current fiscal year.
“Although we see a continued soft market through the first half of the current fiscal year, we are hopeful of an improved outlook in the second half,” he said in a statement. “Carl’s Jr. is poised to take advantage of an upturn in the economy.”
He said the company has launched a new advertising campaign promoting its hamburgers to appeal to price-and-time-conscious consumers. It has also introduced a new chicken sandwich that has been well-received by customers.
While competitors such as McDonald’s and Taco Bell have been cutting prices on some products to drum up business, Karcher has refrained from price cuts.
Some analysts said that Carl’s Jr.’s reluctance to slash prices has probably hurt its business as diners turned to less-costly alternatives. But others said the company’s strategy is a sound one.
“I think one of the most important things that Carl’s can do is get a pricing strategy that people can understand,” said Doug Christopher, an analyst at Crowell, Weedon & Co., a Los Angeles brokerage. He faulted the company for being “slow at the switch” to offer discount menu items.
But Janet Lowder, a restaurant industry consultant in Rancho Palos Verdes, said Karcher may be getting buffeted by competition, but it would be wise to wait out the recession.
She said Carl’s Jr. emphasis on a menu that stresses healthier fare will gain popularity with consumers when the economy improves.
“Carl (Karcher) did not jump on that (discounting) bandwagon. I think he wanted to place his outlets above that,” she said. “I think they should stick with the formula.”
For the fourth quarter, Karcher reported earnings of $617,000, contrasted with a year-earlier loss of $8.9 million. Revenue was $118.8 million, unchanged from $118 million.
The company is celebrating its 50th anniversary this year. It presently operates, licenses or franchises 583 restaurants in California, Nevada, Oregon, Arizona, Mexico and Japan.
