CKE Profit Tumbles Despite Gain in Sales

Profit at CKE Restaurants Inc. fell 42% in its second quarter, despite sales growth at Carl’s Jr. and Hardee’s, its Midwestern burger chain, the company said Wednesday.

Net income for Santa Barbara-based CKE was $6.3 million, or 10 cents a share, for its quarter ended Aug. 11, compared with $10.8 million, or 18 cents, a year earlier. Last year’s results were helped by $3.7 million in one-time gains from the sale of stock in Checkers Drive-In Restaurants Inc.

Revenue in the latest quarter was $333.7 million, up 2% from $327.6 million a year earlier.

The results were released after the stock market closed. CKE shares lost 38 cents to close at $7.20 on Wednesday on the New York Stock Exchange. For the year, the shares have climbed 67%, and they hit a 52-week high Tuesday. Investors have been anticipating that CKE’s long-struggling Hardee’s chain is poised for a turnaround.

In CKE’s second quarter, sales rose 2.3% in Carl’s Jr. stores open at least one year, along with a 1% increase in same-store sales at Hardee’s.

CKE also said Hardee’s same-store sales were up 6.5% for the four weeks ended Sept. 8. It was the second straight monthly sales gain at St. Louis-based Hardee’s, which accounts for two-thirds of the CKE stores but less than half of the revenue.

CKE acquired Hardee’s in 1997 in an effort to broaden the company beyond the Carl’s Jr. chain, which is largely in the Southwest.

But Hardee’s, which has 2,154 outlets, has slowed CKE’s earnings and been a challenge to turn around.

To streamline its restaurants, as many as 40 items were cut from Hardee’s menu. In place of ham and cheese sandwiches and hot dogs, the chain began offering about a dozen menu items, most featuring Angus beef.

The moves helped boost the average Hardee’s guest check by 9% year-over-year, CKE Chief Executive Andrew Puzder said.

“People are ... seeing these numbers as an indication of a turnaround at Hardee’s,” said Amy Greene, a restaurant analyst with Avondale Partners. But she thinks it’s too soon to tell whether the sales rebound is sustainable.

So far this year, same-store sales at Hardee’s are off 0.7%, compared with an 0.8% decline last year.

By comparison, same-store sales at Carl’s Jr. are up 1.4% year-to-date, while same-store sales at La Salsa Fresh Mexican Grills, another CKE chain, are off 2.5%.