News
CKE posts $3.1M Q1 loss
June 22, 2010
CKE Restaurants Inc., parent company of Hardee's and Carl's Jr., posted a $3.1 million dollar loss for the first quarter ended May 17. Carl's Jr. continues to be negatively impacted by the economic downturn and high unemployment rates in its core market of California and among its target demographic of young men.
Same-store sales at company-operated Carl's Jr. locations were down 6.1 percent, which the company attributed to the particularly weak economy in California. On a two-year basis, same-store sales decreased 11.2 percent.
Hardee's company-operated same-store sales were down 1.2 percent, also attributed to weak economic conditions. On a two-year basis, same-store sales were up 1.3 percent.
Blended company-operated same-store sales were down 3.9 percent, compared to a decline of 1.8 percent in the same period last year.
The company also was negatively impacted with decreased restaurant-level margins due to increased commodity costs and labor costs. At Carl's Jr., food and packaging costs increased 130 basis points, primarily due to commodity cost increases for beef, produce, pork and potatoes. At Hardee's, food and packaging costs increased 60 basis points primarily due to commodity cost increases for pork, beef, produce and dairy products. Labor costs were up due to increases in the minimum wage.
Andrew F. Puzder, CKE Restaurants CEO did see some encouraging signs, however.
"I am pleased that we maintained our market share, that Hardee's has now had three consecutive periods of positive same-store sales, and that we started to see same-store sales trends improve for both brands late in the quarter," he said. "We will remain focused on maintaining our premium quality brands and improving our same-store sales with innovative products and cutting edge advertising that focuses on the taste, quality and value of our products. We will also continue to strategically add to our company-operated store count and expand our franchise base in both domestic and international markets."
Total revenue for the quarter was down 2.6 percent to $435.2 million, compared to $446.8 million in the same period last year.
The company's $3.1 million net loss, impacted in part by transaction fees and costs of $20.9 million. The company also reduced its bank and other long-term debt by $1.8 million to $276.7 million, despite capital expenditures required for its ongoing remodel program.
Carl's Jr. and Hardee's increased their system-wide unit count by five restaurants for a consolidated total of 3,146.
Period 5 results encouraging
Looking forward, Puzder said he was encouraged by the company-operated same-store sales results for period five ended June 14. Blended company-operated same-store sales were down 1.1 percent, compared to a decline of 5.2 percent in the same period last year. Carl's Jr. company-operated same-store sales were down 5.3 percent, compared to a decline of 7.1 percent in the same period last year. Hardee's company-operated comps were up 4.1 percent, compared to a decline of 2.7 percent in the same period last year.
"Hardee's same-store sales grew nicely and delivered the fourth straight period of positive results fueled by the introduction of Hand-Breaded Chicken Tenders into much of the system, the continuing strong sales of the Grilled Cheese Bacon Thickburger and strong sales at breakfast," Puzder said. "However, Carl's Jr. same-store sales continued to be negatively impacted by the poor economic conditions and high unemployment rates in our core California market."Special meeting of stockholders
The company will not be hosting a conference call to discuss first quarter results. The company will be hosting a webcast of the special meeting of stockholders, which will be held at 8:00 a.m., Pacific time June 30. At the special meeting of stockholders, the company's stockholders will vote on the proposal to adopt the company's merger agreement with Columbia Lake Acquisition Holdings Inc. and Columbia Lake Acquisition Corp., both affiliates of Apollo Management VII L.P.
If the proposal to adopt the merger agreement is approved by the requisite number of holders of the company's common stock, the company anticipates that the closing of the merger will occur on July 7, 2010. The company invites investors to listen to the live webcast of the special meeting of stockholders at www.ckr.com under "Investors."
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