CKE Profits Double; Shareholders Cash In

CKE Restaurants Inc., parent of the Carl’s Jr. and Hardee’s burger chains, reported a record fourth-quarter profit Tuesday that was more than double the previous year’s earnings.

Investors reacted by dumping the company’s shares.

The fast-food giant said profits doubled to $12.5 million, or 26 cents a share, thanks mostly to last year’s acquisition of the 867-unit Hardee’s Food Systems. The company said its introduction of a popular steak sandwich at Carl’s Jr. and cost-cutting moves at Hardee’s also improved the bottom line.

CKE earned $6.2 million, or 17 cents a share, in last year’s final quarter.

The results topped Wall Street’s expectations, but that wasn’t enough to stop CKE shares from sliding 6%, or $2.38 a share, to $38.63 in New York Stock Exchange trading.

Company officials surmised that after a nearly four-year uphill run under Chairman William P. Foley II, some investors may have decided to cash in their paper profits.

CKE stock posted a total return--price increases plus dividends--of 98% over the last 12 months and posted compounded annual returns of 50% over the last five years and 25% over the last decade.

“We aren’t going to get all worked up over one day’s worth of stock trading,” said Loren Pannier, senior investor relations director. “This is a marathon, not a sprint. We’ll just continue to work at making more money for our shareholders.”

Last year’s purchase of Hardee’s catapulted CKE to the No. 4 burger chain behind McDonald’s, Burger King and Wendy’s. CKE will draw closer to Wendy’s later this month when it completes a deal to buy another 557 Hardee’s from Advantica Restaurant Group Inc.

CKE said it plans to open 30 to 40 Carl’s Jr. eateries this year and will continue to meld the Carl’s Jr. lunch and dinner menus with Hardee’s breakfast lineup at Hardee’s restaurants in the Midwest.

Revenue for the company’s fiscal fourth quarter, which ended Jan. 26, rose 90% to $324.7 million from $170.6 million.

Sales at Carl’s Jr. restaurants open at least a year--a key measure of growth--grew 6.7% in the fourth quarter on top of a 10.5% gain a year earlier. Same-store sales at Hardee’s fell 9.3% from a year earlier, mostly because of a scaled-back menu.

For the year, CKE’s profits also doubled to a record $46.8 million, or $1.07 a share, from $22.3 million, or 67 cents a share. Sales grew 86% to $1.15 billion from $613.4 million.

CKE owns, operates or franchises 3,964 restaurants under the names Carl’s Jr., Hardee’s, Taco Bueno, Rally’s, JB’s and Galaxy Diner.

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CKE, parent of the Carl’s Jr. chain, more than doubled its profit for its fiscal year that ended Jan. 26. Revenue increased nearly 90%. Revenue and earnings trends, in thousands:

Revenue

1998: $1,149,659

Earnings

1998: $46,757

Source: CKE Restaurants Inc.