CKE Stock Falls on Sales Forecast

CKE Restaurants Inc.’s shares slumped 22% on Thursday after the company reported its latest results and told analysts that its biggest chain, Hardee’s, will have another quarter of declining same-store sales.

The company said its net income rose 8% to $13.5 million, or 26 cents a share, in the fiscal fourth quarter 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.

In a conference call with analysts to discuss the company’s fiscal-fourth quarter results, 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.

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, Hickok said.

“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 immediately be reached to comment.

CKE said Hardee’s same-store sales fell 4.1% in the fiscal fourth quarter ended Jan. 25. That was worse than the company’s target of a 2% to 4% decline and happened because it had many temporary restaurant closings during winter storms, Foley said in a prepared statement.

Anaheim-based CKE also operates 852 Carl’s Jr. Restaurants and 111 Taco Bueno restaurants.

CKE’s shares fell $5.13 to close at $18.63 on the New York Stock Exchange on trading volume nearly seven times higher than the stock’s three-month daily average. The shares fell as low as $18.38.

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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