CKE Stock Drops 23% on Report That Hardee’s Revenue Continues Decline

CKE Restaurants Inc.’s stock slumped 23% Thursday in heaving trading after the Anaheim company told analysts that its biggest chain, Hardee’s, will have another quarter of declining same-store sales.

The stock, which was the 15th-biggest percentage loser in U.S. markets, fell $5.13 a share to $18.63 a share on the New York Stock Exchange in trading of 4.28 million shares, nine times the average daily volume over the last three months. At one point during the session, the shares moved as low as $18.38 before edging up a bit.

In a conference call with analysts to discuss the company’s fiscal-fourth quarter results, which also were announced Thursday, CKE executives disappointed analysts with the Hardee’s forecast, according to Allan Hickok at U.S. Bancorp Piper Jaffray.

About two weeks ago, he said, analysts were told that Hardee’s, with 2,800 locations, would show a sales increase at restaurants open at least a year, a key indicator of performance in the industry.

While the results don’t mean CKE Chief Executive William Foley is failing to turn around the ailing chain, it does mean impatient investors want the improvement sooner, said Hickok.

“I think they are doing the right things, and doing a good job of improving the chain, but from Wall Street’s perspective, they aren’t doing it fast enough,” he said.

Hickok said he was expecting CKE to report an increase of half a percentage point in same-store sales.

Company officials couldn’t be reached for comment.

CKE said Hardee’s same-store sales fell 4.1% in the fiscal-fourth quarter ended Jan. 25. That was worse than the 2% to 4% decline that the company targeted. Many restaurants were closed temporarily during winter storms, Foley said in a statement. Same-store sales for the Carl’s Jr. chain decreased 1.3%.

Despite the same-store results, net income in the fiscal-fourth quarter ended Jan. 25 rose 8% to a record $13.5, or 26 cents a share, from $12.5 million, or 24 cents, a year earlier. Revenue, including franchised and licensed restaurants, rose 33% to $431.4 million from $324.7 million.

For the year, the company posted record net income of $77.7 million, or $1.45 a share, up 66% from $46.8 million, or 97 cents a share, for the previous year. Revenues moved up 65% to $1.9 billion from $742.4 million.

In addition to Hardee’s, CKE operates 852 Carl’s Jr. Restaurants and 111 Taco Bueno restaurants.

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Burger Woes

CKE Restaurants’ stock price was back in the range it was trading at two years ago after the company reported declining same-store sales at Hardee’s, its biggest chain. Monthly closes and latest on the NYSE:

March 1997: $18.28

Thursday: $18.63, down $5.13

Source: Bloomberg News