CARPINTERIA Calif. CKE Restaurants Inc., parent of the Carl's Jr. and Hardee's brands, said it would continue to focus on its premium offerings despite "aggressive discounting and literal giveaways" by its quick-service rivals.
CKE officials spoke to investors in a conference call Thursday, a day after releasing the company's fiscal 2009 second quarter results, which included a 30-percent jump in profit on reduced costs and modest sales growth.
Andrew Puzder, CKE's president and chief executive, said both chains would "steer clear" of using value items to drive traffic and would rely instead on higher-priced items, such as the Prime Rib Burger, which it promoted in the second quarter.
"It's not part of our long-term strategy to compete in the low-quality, low-priced value area," Puzder said. "We have a hard time seeing how our competitors can be making much of a profit selling double cheeseburgers at 99 cents."
CKE officials also said the company would focus on remodeling efforts, overseas growth and dual-branding its burger restaurants with its Red Burrito and Green Burrito concepts.
For its second quarter ended Aug. 11, CKE posted net income of $12.3 million, or 23 cents a share, compared with profit of $9.4 million, or 15 cents, a year ago. Earnings were helped in the latest quarter by the company's share repurchase plan, which reduced the number of common shares outstanding by 11 million, CKE said.
Profit also was boosted by cost reductions, including an 11.4-percent dip in payroll and employee benefit expenses, CKE said. For the second quarter, officials said consolidated operating costs dropped 80 basis points to 80.7 percent of company-operated restaurant revenue, despite higher food and packaging costs and expenses related to the company's remodeling program. Puzder credited price increases as well as cost-control initiatives implemented over the past year.
Revenue fell 2.9 percent, to $352.5 million, for the second quarter. CKE said the dip in revenue reflected the refranchising of 155 Hardee’s units, which was partially offset by the opening of 20 company-operated stores in the quarter.
Blended same-store sales for company-operated stores rose 3.6 percent in the second quarter, which included a 3.8-percent increase at Carl’s Jr., and a 3.3-percent jump at Hardee’s.
However, preliminary same-store sales figures for the four weeks ended Sept. 8, which were released Wednesday, indicate that discounting by competitors may hurt both brands in the third quarter, CKE said. Same-store sales fell 0.1 percent at Carl's Jr. for the period, but rose 1.1 percent at Hardee's.
CKE said sales at Hardee's were hurt by recent storms in the Midwest and Southeast.
As of the end of its second quarter, CKE Restaurants operated or franchised 1,170 Carl's Jr. restaurants and 1,917 Hardee's restaurants.