Owner of Hardee's and Carl's Jr. Posts Big Loss

The company is trying to revive sales at Hardee's, its biggest chain, by improving service and cleanliness. Profit was hurt by costs to remodel restaurants.

Los Angeles Times
December 15, 2000

Owner of Hardee's and Carl's Jr. Posts Big Loss
Restaurants: CKE group blames increased costs and declining sales. It plans to sell Taco Bueno chain.
From Times Staff and Wire Reports

CKE Restaurants Inc., which owns the Hardee's and Carl's Jr. hamburger chains, posted a larger loss than expected Thursday for the fiscal third quarter as increased costs and declining sales at Hardee's restaurants ate into its bottom line.

The Anaheim company also said its plans to sell its Taco Bueno chain, a move aimed at further reducing CKE's debt, have stalled.

CKE's loss from continuing operations totalled $7.4 million, or 15 cents a share, in the quarter ended Nov. 6, as sales fell 10% to $407.5 million. Analysts were anticipating a loss of about 9 cents a share. A year earlier, the company earned $3 million, or 6 cents a share.

The company is trying to revive sales at Hardee's, its biggest chain, by improving service and cleanliness. Profit was hurt by costs to remodel restaurants.

Some now offer table service, charbroiled hamburgers or all-you-can-drink beverage bars. CKE also has been selling more of its restaurants to franchisees.

In the most recent quarter, CKE had pretax losses of $31.9 million on the sale of company-operated restaurants and charges related to increasing its reserves for self-insurance and store-closing costs. Including these items, CKE said its loss was $29.4 million, or 58 cents a share.

Indeed, the company appears to be facing an uphill battle, analysts said.

"We have no way of projecting when this company will turn a profit," said Allan F. Hickok, an analyst at U.S. Bancorp Piper Jaffray.

CKE's stock closed Thursday at $2.25, down 69 cents a share, in New York Stock Exchange trading. The shares have fallen more than 61% this year.

In a key indicator of Hardee's struggles, sales in company-operated and franchised restaurants open at least a year fell 5.9%. By contrast, same-store sales inched up 2% at Carl's Jr.

CKE also experienced a setback in its effort to chip away at its debt when its tentative deal to sell its Taco Bueno chain to Commercial Revolution for about $90 million failed to proceed as planned.

CKE said its debt totals $683 million. The company has until Wednesday to pay $60 million to its banks, with another $60 million due in late January, analyst Andrew Barish at Robertson Stephens pointed out Thursday in a report.

"Obviously, these payments take priority for management, but leave little for the [shareholders] to be excited about," Barish wrote.

CKE Chief Executive Andrew F. Puzder said the company had sold 341 Hardee's and 43 Carl's Jr. restaurants and other assets, raising $123.6 million. CKE also has "several transactions pending" that would help reduce debt further, Puzder said in a release.

CKE operates more than 3,800 restaurants through its units, franchisees and licensees. They include 2,724 Hardee's, 973 Carl's Jr. and 125 Taco Bueno outlets.


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