CKE Restaurants Inc. CEO Andrew Puzder told investors on the company's fourth quarter and fiscal year conference call Thursday that he feels the company's two brands, Carl's Jr. and Hardee's, are in a stronger position now than at the start of the recession. Both brands have bolstered market share as the company has sought to preserve restaurant margins and improve same-store sales. The company will continue to work to improve sales and as well as focus on its "quality at a value" perception throughout 2010.
Fourth quarter blended same-store sales were down 6.0 percent, with poor weather at the end of the year impacting results. Carl's Jr. company-operated same-store sales for the quarter were down 8.7 percent as a result of the particularly weak economy in California and poor weather conditions. On a two-year basis, same-store sales decreased 9.3 percent.
Hardee's company-operated same-store sales for the quarter were down 2.5 percent, also due to weak economic conditions. On a two-year basis, same-store sales decreased 1.0 percent.
Year to date, blended same-store sales were down 3.9 percent.
Company-operated restaurant-level margin decreased 1.8 percent for the quarter to 16.2 percent of company-operated restaurants revenue, in part as a result of a 100 basis point increase in depreciation costs, primarily associated with recent remodeling activities. Carl's Jr. restaurant-level margin declined to 17.3 percent in the fourth quarter vs. the same period last year at 21.0 percent of company-operated restaurants revenue.
Hardee's company-operated restaurant-level margin increased to 14.8 percent of company-operated restaurants revenue compared to 14.0 percent in the prior year primarily due to lower commodity costs for beef, cheese, oil and flour, lower utilities and decreased general liability insurance costs. Partially offsetting these favorable expenses was a 110 basis point increase in depreciation costs, primarily related to recent remodeling activity and equipment upgrades and increases in labor costs associated with the federal minimum wage rate hike and sales deleveraging.
Company-operated restaurant-level margin for the year decreased 30 basis points to 18.6 percent of company-operated restaurants revenue as a 90 basis point increase in depreciation costs, primarily associated with recent remodeling activities and higher labor costs were, partially offset by favorable commodity costs.
　
CKE increased its systemwide unit count by 25 restaurants for a consolidated total of 3,141.
"Even though we saw weakness in the overall economy, high unemployment rates and deep-discount burger wars, I'm proud to say that for the year we maintained market share, our premium branding and remarkably constant levels of profitability," said Andrew F. Puzder, CKE Restaurants CEO in a news release. "We will stay on course as we enter fiscal 2011 with our focus on big, juicy premium burgers for hungry guys and as we grow our company stores and quickly expand our franchisee presence. To grow same-store sales we will continue with our aggressive new product launches, cutting edge advertising, dual branding and remodeling; all the while looking for ways to increase profitability."
2010 strategy
The company's strategy for 2010 includes:
- Focus on premium product development
- Perception-changing advertising, including focusing on the brands' premium products at value pricing and broadening appeal through digital media, such as targeting customers interested in gluten-free, low-fat and better-for-you offerings
- Remodeling and growth initiatives
During fiscal year 2009, the company remodeled 55 Carl's Jr. and 102 Hardee's restaurants and completed a combined 42 dual-branded Green Burrito and Red Burrito restaurant conversions.
Growth initiatives include increasing the number of company-owned stores as well as franchise-owned units. Franchise growth is expected to outpace company-owned units with 90 percent of new units to be franchised. The system expects to be 75 percent franchised by fiscal year 2015. The company expects 229 new units domestically by 2015 as well as to more than double its international presence with an additional 369 stores in that time.
Financial results
Revenue for the quarter was 4.8 percent at $311.7 million, compared to $327.5 million in the same quarter last year. For the year, revenue was down 4.3 percent at $1.4 billion, compared to $ 1.5 billion last year.
Net income for the quarter was up significantly over the same period last year at $15.4 million vs. $2.6 million, a total that includes a $9.9 million tax benefit related to a reduction in valuation allowance for deferred income tax assets. Year to date, net income was up 30 percent at $48.2 million compared to $37.0 million last year.
CKE could not comment on its pending acquisition by THL Partners.
A replay of the company's conference call and webcast is available at the company's Web site under "Investors."
