Hardee’s Chain Drags Down CKE Again

CKE Restaurants Inc., the nation’s fourth-largest hamburger chain, said Thursday that sagging sales at its Hardee’s unit had caused another quarter of losses.

The Anaheim-based company, which also owns the Carl’s Jr. chain, said it lost $2.5 million, or 5 cents a share, in its first quarter ended May 22. A year ago, the company reported net income of $19.4 million, or 37 cents a share.

The loss was higher than expected by analysts, who were looking for a loss of 3 cents a share, according to a survey by First Call/Thomson Financial.

CKE stock, which has dropped 80% over the past year, slipped further Thursday, falling 13 cents to close at $3.06 in New York Stock Exchange trading.

As it has for more than a year, the company blamed its troubles on the struggling Hardee’s unit, where sales have continued to decline since CKE acquired the chain in 1997.

“Hardee’s has been an extremely difficult acquisition for them,” said Mark Sheridan, analyst at Johnson Rice in New Orleans. “They’re trying to change a deteriorating business in an increasingly difficult environment.”

Sales at company-owned Hardee’s outlets that have been open at least a year fell 6.2% in the first quarter. Same-store sales at company-owned Carl’s Jr. stores rose 3.6%. At CKE’s third unit, Taco Bueno, same-store sales dropped 1.9%.

Overall, CKE’s first-quarter revenue fell 1.9% to $584.3 million.

Hardee’s newly appointed president, Andrew F. Puzder, has said he plans to sell about 500 company-owned stores to franchisees in an effort to reduce debt and raise funds for remodeling other stores.

Rising costs--particularly to remodel old Hardee’s stores--continue to be a drag on the company’s earnings.

CKE Chief Executive Tom Thompson said in a conference call Thursday that the company was moving to reduce those expenses and speed up the renovation program, which is considered crucial to boosting sales at the Hardee’s chain.

Rather than spend $160,000 per store to upgrade the kitchens and dining rooms of each store, the company will scale down its renovation program, spending $80,000 per store to install charbroiling equipment and paint the exteriors.

“We need to get there more quickly,” said Thompson, who noted that the revamped restaurants are outperforming those that are not yet remodeled.

To date, 724 Hardee’s have been remodeled. An additional 450 company-owned restaurants and 790 franchisee-owned locations have yet to be renovated.

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Bloomberg News was used in compiling this report.