CKE Weathers Storms

CKE's net income for the third quarter increased to $15.8 million, or 23 cents per diluted share, up from $13.1 million, or 20 cents per diluted share in the third quarter of the previous fiscal year. The profit increased despite sales that dipped to $344.1 million, compared with nearly $349 million for the third quarter of the year before.

Same-store sales were essentially flat at company-operated Carl's Jr. restaurants during the third quarter and they declined 3.5% at the Hardee's chain. Both Carl's Jr. and Hardee's faced difficult same-store sales comparisons from the previous year, Puzder said, citing a 7.9% gain at Carl's and a 4.5% gain at Hardee's in the third quarter of last year.

However, restaurant-level margins improved by 1.5% at company-operated Carl's Jr. restaurants and rose by half a percentage point at Hardee's restaurants during the quarter, results that Puzder cited as encouraging in light of the tough conditions during the quarter. He also noted that average unit volumes at company-operated Carl's Jr. restaurants totaled$1.32 million for the trailing 52 weeks at Carl's, a record for the chain.

Puzder said he was disappointed that CKE's performance is not reflected in its stock price when some competitors enjoy stock prices that do reflect their results. "Our company does not appear to receive the same recognition in the market for this strong performance as many of our peer group companies," Puzder said.

Commenting on the hurricanes and the competitive industry environment, Puzder said that the quarterly results show that CKE is operating more efficiently because the company bested last year's results despite the difficult business and weather conditions. "In addition to their direct and immediate impact, the storms helped to drive crude oil prices to record levels, and the resulting increases at the gasoline pumps negatively affected consumers' discretionary spending levels, particularly in the Midwest and the Southeast," Puzder explained.

Although the company is encouraged by recent declines in crude oil prices, gasoline prices remain high, the CKE CEO pointed out, so the company will continue to focus on "controlling costs in this difficult operating environment." While CKE is pleased with its third-quarter results, "The competitive environment will be just as challenging in the fourth quarter," Puzder said.

"The outlook for utility costs over the winter months is less than favorable, particularly for natural gas and particularly in Hardees' Midwestern and Southeastern markets," Puzder cautioned. Also, both brands in the fourth quarter will be lacking promotional items that helped to boost sales in the third quarter. CKE restaurants totaled 3,163 franchised and company-owned locations in 43 states and in 13 countries at the end of the quarter, including 1,042 Carl's Jr. locations, 2,004 Hardee's restaurants and 101 of the La Salsa Fresh Mexican Grill chain.