Shares of Carl’s Jr. Parent CKE Plunge on Earnings Warning

CKE Restaurants Inc., the No. 4 U.S. burger chain, warned Monday of disappointing fiscal second-quarter earnings because of lower sales and profit at its Carl’s Jr. and Hardee’s restaurants. The news sent its shares tumbling.

It marked the fourth straight quarter in which Anaheim-based CKE warned earnings would fall short of expectations.

Second-quarter earnings will be 19 cents to 21 cents a share, much lower than the 33-cent average estimate of analysts polled by First Call Corp. CKE further warned that Carl’s Jr. and Hardee’s could be a drag on earnings in the third and fourth quarters.

CKE’s stock fell 29%, or $3.94, to $9.63 a share, the 11th-largest percentage loss Monday on U.S. markets. Earlier in the session, the shares had touched $9.13, their lowest level in more than three years. In the last year alone, the stock has lost about 73% of its value.

Nearly 3.6 million shares changed hands Monday, about eight times the average daily volume over the last three months.

The recasting of Hardee’s restaurants, all located in the eastern half of the U.S., into a new Star Hardee’s format, with improved menus and service and charbroiled burgers, is moving more slowly than expected. Carl’s Jr. faces tough competition on the West Coast.

“CKE continues to struggle on two coasts,” said Robert Derrington, an analyst at SunTrust Equitable Securities in Nashville. “This is an extremely competitive segment,” said Derrington, who has an “attractive long-term” rating on CKE shares.

In April 1998, CKE bought 557 Hardee’s restaurants from Advantica Restaurant Group Inc. for $426.4 million, bringing its total Hardee’s locations to about 2,800. About half are company-owned and the rest operate as franchises.