News
Improved margins help Carl's Jr., Hardee's as Q3 comps stay negative
December 8, 2009
CKE Restaurants Inc., parent company of Carl's Jr. and Hardee's restaurants, has improved net income for the third quarter ended Nov. 2 even as comps continue in a negative trend.
Blended company-owned same-store sales were down 3.7 percent for the quarter, a slight improvement in comps over the previous quarter, when comps were down 4.6 percent.
Carl's Jr. company-operated same-store sales were down 5.2 percent, a result of the particularly weak economy in California. On a two-year basis, same-store sales declined 4.7 percent.
Hardee's company-operated same-store sales were down 1.8 percent, also due to weak economic conditions. On a two-year basis, same-store sales decreased 0.5 percent.
Total quarterly revenue was $324.2 million, a decline of 3.7 percent compared to $336.6 million in the same period last year. Year to date, revenue was $1.1 billion, down 4.2 percent compared to $1.2 billion last year.
Net income was up 14.8 percent at $6.2 million, compared to $5.4 million in the same quarter last year. Year-to-date net income was down 4.4 percent at $32.8 million, compared to $34.4 million last year.
"The U.S. economic downturn and particularly high unemployment rates in California and among our core target audience of young men, continued to impact same-store sales at Carl's Jr. and Hardee's," said Andrew F. Puzder, CKE Restaurants CEO in a news release. "I am, however, pleased by our increase in company-operated restaurant-level margins and our attractive overall profitability despite these same-store sales headwinds.
"Our profitability remained strong as we avoided the competition's deep-discounting tactics and due to favorable commodity costs. We were able to improve our margins despite an 80 basis point increase in depreciation expense for the quarter primarily due to our remodel programs at both brands.
During the quarter, the company remodeled 15 Carl's Jr. and 16 Hardee's restaurants and completed a combined 12 dual-branded Green Burrito and Red Burrito restaurant conversions during the quarter.
Carl's Jr. and Hardee's increased their system-wide unit count by 31 restaurants year-to-date for a consolidated total of 3,147.
Puzder said the brands will continue to emphasize the value of their premium products in its advertising program "while also pursuing new initiatives to improve same-store sales results in these challenging times." The new new initiatives include:
- Launch of new premium products, including the recent Hardee's Portobello Mushroom Melt Thickburger
- Promoting healthier menu options via cost-effective digital media
- Kick-off later this month of a new line of premium entrée salads at Carl's Jr. with an advertising campaign starring popular celebrity Kim Kardashian
Period 11 results
CKE Restaurants also announced company-operated same-store sales for period 11, ended Nov. 30.Blended company-operated same-store sales were down 5.2 percent for the period, compared to an increase of 0.3 percent in the same period last year.
Company-operated same-store sales at Carl's Jr. were down 8.1 percent, compared to an increase of 0.1 percent in the same period last year.
At Hardee's, company-operated same-store sales were down 1.4 percent, compared to an increase of 0.5 percent in the same period last year.
"While Hardee's continues to weather the recession as well or better than most of its peers, the further weakening of California's economy continued to impact Carl's Jr.," Puzder said. "In this environment, we will continue to focus on our profitability and the excellent value-for-the money of our premium products while implementing new initiatives to improve same-store sales and increase market share."
Carl's Jr. recently introduced the $6 Cheeseburger with Black Angus beef at value price of $2.79. The chain also began offering three flavors of vitaminwater at most locations.
Hardee's launched the Portobello Mushroom Melt Thickburger.
"We continue to believe the best way to position ourselves for an economic recovery is to maintain our brand image and integrity," Puzder said.
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