4th Bad Quarter for CKE Means Hardee’s Job Cuts
Blaming its struggling Hardee’s hamburger chain, CKE Restaurants Inc. on Thursday predicted a fourth straight quarter of lower-than-expected earnings and said it will eliminate 150 jobs at Hardee’s North Carolina headquarters.
CKE, which also operates Carl’s Jr. and Taco Bueno Mexican restaurants, said most of the functions at Hardee’s Rocky Mount, N.C., offices will be moved to CKE headquarters in Anaheim, creating a single administrative center for all three chains.
Some Hardee’s corporate employees will be offered jobs in Anaheim as the cuts take place over the next eight months. But most positions created locally will be non-managerial, said CKE spokeswoman Suzi Brown.
“We’re anticipating approximately 65 new hires--mostly payroll clerks, people in accounting and similar jobs,” Brown said. About 150 Hardee’s employees will remain in Rocky Mount after the cuts, in direct-support roles such as field marketing and training.
CKE President Tom Thompson said the reorganization of Hardee’s, which CKE acquired in 1997, was hastened by Hurricane Floyd flood damage to Hardee’s buildings and the planned sale of some stores to franchisees. Those factors made it less attractive to keep Hardee’s administration in North Carolina.
CKE, the nation’s fourth-largest burger chain, said it expects to report earnings of $2.6 million to $4.2 million, or 5 cents to 8 cents a share, in its third quarter, which ended Nov. 1. Analysts were expecting a profit of about $9.9 million, or 19 cents a share. During its third quarter last year, CKE earned $19 million, or 39 cents a share.
The company has warned of lower-than-expected earnings every period since last year’s fourth quarter. Its shares, which topped $40 in 1998, have fallen as low as $6.38 recently. The stock closed Thursday at $7.19 in New York Stock Exchange trading, up 19 cents. CKE made its announcement after the markets closed.
Sales at Carl’s Jr. restaurants open at least a year also are trailing year-earlier levels, but CKE spokesman Loren Pannier said profit margins from the chain’s 896 eateries remain “the best in the industry.” Pannier said Taco Bueno’s 115 restaurants in Texas and Oklahoma are posting excellent results, “so we have two strong brands.”
However, CKE has found it difficult to digest the nearly 2,800 Hardee’s restaurants it acquired in two fish-swallows-the-whale transactions. “Quite frankly, we were a little overoptimistic,” Pannier said.
On the bright side, sales have risen at the 19% of the Hardee’s outlets that have been remodeled, renamed Star Hardee’s and changed to a Carl’s Jr.-style mode of operation, with charbroiled burgers and food delivered to tables by employees. “We still see a significant opportunity to create value at Hardee’s,” Pannier said.
Besides the lower sales at hamburger chains and hurricane damage, CKE said its earnings will decrease because of software expenses, increased Y2K compliance costs and an acceleration of the Star Hardee’s remodeling program.
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Bloomberg News and Dow Jones News Service contributed to this report.
