Product introductions boost Carl's Jr., Hardee's sales

Sept. 20, 2012 | by Alicia Kelso

CKE Restaurants Inc. announced its second fiscal quarter financial results for the 12 weeks ended Aug. 13.

Company-operated same-store sales increased 2.9 percent, with Carl's Jr. same-store sales up 4 percent and Hardee's same-store sales increasing 1.6 percent in the quarter.

During the company's earnings call, CEO Andrew Puzder said these results were driven by successful product launches, including the grilled cheese bacon burger, which was supported by a national advertising campaign in conjunction with Columbia Pictures' The Amazing Spider-Man, as well as the bacon bacon biscuit and hand-breaded chicken wrappers.

Additionally, Carl's Jr. got a boost from the rollout of sweet potato fries and continued to yield positive results from its Made From Scratch Biscuits that were introduced in November 2011.

"The biscuits at Carl's Jr. have been a big help (with breakfast), but all dayparts have been contributing," Puzder said.

The big battle the company faced during the quarter was the heat wave, particularly in Hardee's markets in July. The aftermath of the heat is also causing commodity pricing concerns.

"Beef is our big protein and with the drought, we expect an increase to come (in pricing). We can deal with it in a couple of ways – with pricing and with our other proteins. We have chicken sandwiches and turkey burgers. We just have to wait and see what those increases really are," Puzder said.

However, don't expect a mass introduction of new chicken products. Puzder pointed out that the chains' competitors are coming out with many chicken items right now. "Which means we probably won't because whatever they do we don't do," he said.

The chains' turkey burgers continue to generate strong consumer acceptance, particularly in California. CKE anticipates keeping the option on the menu.

Another point touched upon during the earnings call was with dual-branded restaurants with Red Burrito and Green Burrito. Less than 25 percent of the company is co-branded currently, but executives see a "big opportunity" with the dual concepts and that number can rise "north of 50 percent."

Q2 numbers

At the end of the second quarter, the 52-week average unit volume for company-operated restaurants was $1,277,000. The fifty-two week average unit volumes for Carl's Jr. and Hardee's were $1,438,000 and $1,132,000, respectively.

To date, company-operated same-store sales for the third quarter of fiscal 2013 are positive in the mid-single digits.

The company reported total revenue of $308.6 million for the fiscal 2013 Q2, an increase of $8.9 million, or 3 percent compared to the fiscal 2012 second quarter.

"We are encouraged by the strong momentum of our business and the positive same-store sales results at both brands during the second quarter. The company has now had eight consecutive quarters of positive company-operated same-store sales. Hardee's has now had nine consecutive quarters of positive same-store sales and Carl's Jr. posted its sixth consecutive quarter of positive same-store sales," Puzder said.

For the fiscal 2013 second quarter, company-operated restaurant-level adjusted EBITDA margin was 19.4 percent, a 230 basis point increase over the prior year second quarter, in part due to the increase in company-operated same-store sales.

Food and packaging costs as a percentage of company-operated restaurants revenue decreased 90 basis points, primarily as a result of higher year-over-year restaurant pricing and changes in product mix.

Adjusted EBITDA for the second quarter of fiscal 2013 increased by $6.8 million, or 16.5 percent, over the prior year second quarter. Adjusted EBITDA was $47.6 million in the second quarter of fiscal 2013 compared to $40.9 million in the prior year second quarter.

As of Aug. 13, the company's systemwide restaurant portfolio consisted of:

  • Company-operated: 892 total (423 Carl's Jr. and 469 Hardee's);
  • Domestic franchised: 1,933 total (696 Carl's Jr. and 1,230 Hardee's);
  • International franchised: 454 total (214 Carl's Jr. and 240 Hardee's);
  • Total: 3,279 (1,333 Carl's Jr. and 1,939 Hardee's).

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Topics: Business Strategy and Profitability , Food & Beverage , Franchising & Growth , Marketing / Branding / Promotion , Operations Management

Alicia Kelso / Alicia has been a professional journalist for 15 years. Her work with, and has been featured in publications around the world, including NPR, Good Morning America, Voice of Russia radio, and Franchise Asia magazine.
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