CKE Posts Third Consecutive Quarterly Loss

CKE Restaurants Inc., the nation’s fourth-largest hamburger chain, posted sharply higher quarterly losses Thursday as the company’s struggling Hardee’s unit continued to take a toll on the bottom line.

Anaheim-based CKE said it lost $13.9 million, or 28 cents a share, in the three months ended Aug. 14, as sales at Hardee’s restaurants sagged and costs increased. It was CKE’s third consecutive quarterly loss.

The company, which also owns the Carl’s Jr. chain, earned $10.3 million, or 20 cents a share, in the second quarter last year. Sales fell 5.8% to $438.5 million.

The sales decline came as CKE sold more company-owned Hardee’s outlets to franchisees.

CKE’s stock slipped 6 cents a share to $3.38 on the New York Stock Exchange. The shares have slumped nearly 58% over the last year while the chain struggled with costs and delays from remodeling Hardee’s stores into Star Hardee’s to provide better food and service.

“The shifting landscape at CKE, impacted by the sale of assets, makes it difficult to project to which extent earnings and revenue will be affected,” said analyst Robert Derrington at SunTrust Equitable Securities. He has a “neutral” rating on the shares.

Excluding losses from selling and closing stores, CKE said it would have lost $3 million, or 6 cents a share.

Analysts’ earnings projections averaged 1 cent a share, although forecasts ranged from a loss of 3 cents to a profit of 5 cents, according to a survey of six analysts by First Call/Thomson Financial.

CKE lost $2.5 million in the first quarter and posted an operating loss of $12.5 million for the fourth quarter.

For the year ending in January, the company expects a loss of 28 cents to 38 cents a share before costs of store sales and closures. CKE was expected to earn 7 cents, according to a First Call poll of analysts. Estimates ranged from a 5-cent loss to a profit of 20 cents.

CKE has said it wants to sell about 500 restaurants to franchisees to reduce debt and finance remodeling. The company said it has sold 254 restaurants to franchisees, raising $73 million, and several sales are pending. It also plans to sell 75 to 100 Carl’s Jr. restaurants by year-end.

CKE, through its units, franchisees and licensees, operates more than 3,800 restaurants. They include 2,762 Hardee’s, 962 Carl’s Jr. and 125 Taco Bueno outlets.

Last week, CKE also said it plans to sell the Taco Bueno chain for $90 million to help reduce its debt. CKE President and Chief Executive C. Thomas Thompson also resigned last week. Andrew F. Puzder, who has headed the Hardee’s operation for three months, was named to succeed Thompson.

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Fast Food Blues

CKE Restaurants stock has dropped more than 40% this year as the parent of Carl’s Jr. and Hardee’s restaurants continues to post losses.

CKR shares, monthly closes and latest on NYSE

Thursday: $3.38, down 6 cents

Source: Bloomberg News