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O.C. EARNINGS

Weak Revenue Growth Tied to 25% Karcher Dip : * 'Consumers have tightened their belts,' says president and chief operating officer of the Anaheim company that owns the Carl's Jr. chain.

September 13, 1991|DEAN TAKAHASHI | TIMES STAFF WRITER

ANAHEIM — Carl Karcher Enterprises Inc., citing the lingering recession in California, said its second-quarter earnings fell 25%, to $3.7 million, despite a modest increase in sales.

"California's economy fell into recession later than the regional economies of many other areas of the country," said Donald F. Karcher, president and chief operating officer of the Anaheim company that owns the Carl's Jr. restaurant chain. "Consumers have tightened their belts accordingly, and we are seeing lukewarm sales as a consequence."

Karcher's earnings for the quarter ended Aug. 12 were 20 cents a share; they were 28 cents for the second quarter a year earlier.

Sales increased 5.2%, to $131.5 million from $125 million a year earlier.

Loren Pannier, chief financial officer, said the company is trying not to cut its prices, which other fast-food chains including McDonald's and Burger King have done.

He said the lower quarterly profits are the result of weakened revenue growth rather than price cutting.

Sales at existing Carl's Jr. outlets were down 1% for the quarter compared to a year earlier, but the company's food services sales grew 28%, to $15 million from $11.7 million a year ago.

Pannier attributed the food services growth to increased sales of surplus food products to other fast-food chains.

Janet Lowder, a restaurant analyst in Rancho Palos Verdes, said Carl's Jr. apparently held its own against heavy discounting promotions by competitors Taco Bell, McDonald's and Kentucky Fried Chicken during the quarter.

"In a tough economy, that is pretty good," she said.

Donald Karcher said he is optimistic that the company will see positive results from a new ad campaign beginning in November. In May, the company gave its $25-million ad account to San Francisco-based Goodby, Berlin & Silverstein.

The campaign will be the company's next major ad push, as Karcher's 50th anniversary campaign draws to a close at year's end. Pannier said the new campaign will last for several years, but he declined to be more specific.

Earnings for the first six months of its fiscal 1992 year were $6.4 million, or 35 cents a share, down 38% from $10.3 million, or 57 cents a share, for the first six months of 1990.

Revenues for the six months ended Aug. 12 rose 5%, to $296.3 million from $282.1 million for the first half of fiscal 1991.

The company has 420 company-owned Carl's Jr. outlets and 182 franchisee outlets in California, Oregon, Nevada, Arizona, Japan and Mexico.

Karcher stock closed Thursday unchanged at $8 a share in over-the-counter trading.

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