CKE Restaurants Has 7th Consecutive Loss
Struggling CKE Restaurants Inc. said Thursday that it lost money for the seventh consecutive quarter as sales sagged, but the company pointed to some signs the worst may be over.
The Anaheim owner of the Hardee’s and Carl’s Jr. hamburger chains lost $36.8 million, or 73 cents a share, for the three months ended Aug. 13, up from a loss of $13.9 million, or 28 cents, in the same period a year ago. But the bigger loss stemmed mostly from one-time charges from closing and selling restaurants.
With fewer stores in the mix, sales dropped 22% to $340.7 million.
But Hardee’s, which has been a financial drain since CKE acquired the chain four years ago, posted modest sales gains at restaurants open at least a year, a key industry indicator.
CKE also said it has erased a bank debt that totaled about $300 million a little more than a year ago.
Reflecting those promising trends, CKE’s stock has been climbing, more than doubling since the beginning of the year and outpacing the 20% average gains of restaurant-retail stocks. The shares closed Monday at $6.17 on the New York Stock Exchange, which shut down after the terrorist attacks Tuesday.
Analysts were upbeat about the quarterly report.
CKE’s management is “turning this around in the right direction,” said Anton Brenner, an analyst at Roth Capital Partners in Newport Beach. The company also has achieved “much more financial flexibility” by eliminating a debt that had saddled CKE with large interest payments and lender restrictions on how it could spend its money, said Mary Gilbert, an analyst with Imperial Capital in Beverly Hills. As a result, CKE should be able to “crank up” its Hardee’s remodeling program and add more company-owned restaurants, she said.
CKE’s program to overhaul Hardee’s by improving service, appearance and food quality seems to be taking root, analysts said. Sales at stores open a year increased by 1%--below the industry average, but a significant improvement over an 8.4% decline a year ago.
Carl’s Jr., buoyed by its “$6 burger” promotion, posted same-store sales of 2.3%, slightly above the estimated 2% increase this year for burger chains, according to Technomic Inc., a restaurant and consulting firm near Chicago.
During the quarter, CKE shuttered 64 Hardee’s and four Carl’s Jr. eateries. To pay down debt, it sold 13 Hardee’s and 23 Carl’s Jr.’s.
CKE expects to close 22 more stores and doesn’t believe it will have significant store-closing costs in the next year.
Excluding costs associated with closing stores and gains from selling stores during both periods, CKE said it would have lost $2.4 million, or 5 cents a share, compared with $2.9 million, or 6 cents, a year earlier.
