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CKE Quarterly Profit Exceeds Expectations

Lower labor costs help lift margins at its Carl's Jr. and Hardee's hamburger chains. Revenue rises 2%.

September 21, 2005|From Reuters

CKE Restaurants Inc. on Tuesday reported a quarterly profit that exceeded Wall Street estimates as lower labor and workers' compensation costs helped boost margins at its Carl's Jr. and Hardee's restaurants, sending shares up 5%.

Net income for the fiscal second quarter ended Aug. 15 was $8.4 million, or 13 cents a share, compared with a net loss of $12.7 million, or 22 cents, a year earlier. Revenue grew 2% to $359.8 million.

Excluding an $11-million charge for buying stock options from its former chairman, Carpinteria-based CKE earned 28 cents a share.

On that basis, Wall Street analysts had expected the company to report earnings of 19 cents to 21 cents a share, according to Reuters Estimates.

Same-store sales, a key retail measure, rose 1% at Carl's Jr. but were flat at Hardee's.

The results "were very good given the struggles in the same-store sales," said JMP Securities analyst Dean Haskell. "They kept costs under control, and they reported a good quarter because of good operating margins."

CKE Chief Executive Andrew Puzder said the company planned to place more emphasis on the low cost of its products given that high gasoline prices were weighing on consumers.

In recent years, sales at both CKE burger chains have benefited from a strategy of marketing higher-priced burgers such as Hardee's Thickburger and Carl's Jr.'s Six Dollar Burger to a primarily young, male demographic.

The chains also have scored with their offbeat advertising, including a racy carwash spot this summer featuring skimpily clad hotel heiress Paris Hilton munching on a burger while washing a Bentley.

In the last few months, however, same-store sales have slowed at both chains in part because consumers have been hard hit by rising pump prices.

CKE shares fell 35 cents to $11.90 before the earnings announcement. In after-hours trading, shares rose 6% to $12.63.

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