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Carl's, Hardee's Operator Eyes Subpar Year

Fast food: CKE Restaurants of Anaheim is expecting slow sales and wants to sell 500 company-owned restaurants to franchisees.

May 10, 2000|GREG HERNANDEZ | TIMES STAFF WRITER

CKE Restaurants Inc. apparently is headed for another subpar year.

The Anaheim-based operator of Carl's Jr. and Hardee's told analysts Tuesday that it expects sales at established outlets to barely keep even or fall below same-store sales in the last fiscal year.

CKE, which has struggled with lackluster sales at its hamburger chains, also disclosed earnings estimates that fall below Wall Street estimates.

At a private meeting of analysts in Marina del Rey, CKE officials estimated that the company will earn 19 cents to 23 cents a share for the year ending next Jan. 31. Analysts were projecting per-share earnings of 30 cents, according to a survey by First Call/Thompson.

Same-store sales for company-owned Carl's Jr. restaurants will be flat to 1% higher, but will be 2% to 4% lower for the struggling Hardee's chain, which is undergoing costly remodeling, executives predicted.

The company, after failing repeatedly to meet financial expectations, is being cautious in its outlook for the year, CKE spokeswoman Suzi Brown said. Instead of "over-promising and under-delivering, we'd rather under-promise and over-deliver," she said.

CKE, the nation's fourth-largest hamburger chain, is coming off a disappointing year in which same-store sales at company-owned stores--a key industry barometer-were off, the company posted a loss, and the stock came under siege.

Sales at company-owned Carl's Jr. stores open at least a year fell 3% last year, while these sales at Hardee's fell 5%. The net loss for the year totaled $29.1 million, or 56 cents a share, while revenue rose 5% to nearly $2 billion.

At the time the results were announced, the company said the Hardee's chain had posed a much bigger challenge than anticipated because many of the restaurants purchased by CKE had been poorly run.

CKE stock has lost nearly 80% of its value over the last 52 weeks. The shares, which traded as high as $19.44, nearly a year ago, closed Tuesday at $3.44, down 13 cents on the New York Stock Exchange.

At Tuesday's meeting, CKE chief executive Tom Thompson stressed that the company had no plans to sell the Hardee's chain, despite remarks last month that CKE was considering hiring an investment banker to explore "strategic alternatives" for the chain.

The company plans to sell 500 company-owned Hardee's restaurants to new or existing franchisees, a move that is expected to generate $150 million for CKE.

"Their focus is still to franchise company stores, which is the best course of action," said Mark Sheridan, an analyst with New Orleans-based Johnson Rice. "If they were to try and sell the entire brand, there wouldn't be a whole lot of attractive bids."

CKE wants to convert Hardee's restaurants into the "Star Hardee's" concept, bolstering the menu with Carl's Jr.-type charbroiled burgers, as well as offering table service.

Brown said the company's falling stock price was not discussed during the approximately two-hour meeting.

CKE has 2,779 Hardee's and 942 Carl's Jr. restaurants. The company also operates 125 Taco Bueno outlets.

Dow Jones News Service was used in compiling this report.

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* SELLING EATERIES:: American Restaurant Group of Newport Beach, which operates Black Angus, is selling four of its units. C3

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