CKE Relies on Dual Branding Sites for Growth

During the fiscal year that ended Jan. 29, CKE opened 13 new company-operated restaurants and its franchisees and licensees opened 62 new restaurants, company officials reported during a conference call with financial analysts to discuss the latest quarterly and yearly results. Officials said that the company plans to continue opening new locations and remodeling, but it's also counting on dual branding with its Green Burrito concept to drive growth.

In addition to new locations, CKE plans to remodel restaurants and to continue rolling out the "dual-brand" concept this year, company president and CEO Andrew Puzder noted in the conference call. The remark underscored a theme that the company has emphasized throughout the year in which it has explained that while CKE continues to build new Carl's Jr. restaurants, most of the brand's growth in recent years has come from its strong franchise community and its dual-branding opportunities with its Green Burrito brand.

As of Jan. 31, 171 of the CKE's 393 company-operated Carl's Jr. restaurants were dual-branded with Green Burrito. These dual-branded Carl's Jr. restaurants typically post both higher sales and profits.

In addition to outlining its growth plans during the conference call, CKE management discussed fourth-quarter and year-end results for the period ended Jan. 29. Net income plunged to $10.3 million for the quarter and $50.2 million for the year, versus $140.9 million for the fourth quarter last year and $181.1 million for the year. CKE explained that this year's results include income tax expenses of $31.9 million, while last year's results included a $123.9-million income tax benefit.

Same store sales grew by 4.9% and 4.8% for the year at company-operated Carl's Jr. and Hardee's restaurants, respectively. For the fourth quarter, same store sales edged up 2.8% at the Carl's Jr. and 4.8% at the Hardee's chain. Overall revenue grew to nearly $1.27 billion from $1.2 billion the year before, with fourth-quarter revenue growing to $359 million from $349 million in the year-to-year quarterly comparison. Puzder attributed the company's higher revenue this year to higher same-store sales as well as the addition of 53 units that CKE assumed control of in the Georgia market earlier this year.

Both Carl's Jr. and Hardee's finished the year with strong same-store sales momentum and reduced their restaurant operating costs as a percent of company-operated revenue for the year, Puzder commented during the conference call. Noting the drop in net income, Puzder pointed out that the company's full year income climbed by 43.4% before taxes despite an increase in charges for stock options and other expenses this year.

"We are very optimistic about the near- and long-term opportunities available to both of our major brands, including the remodeling of our restaurants and the rollout of our dual-branded concepts," Puzder said. As of the end of its fiscal fourth quarter, CKE Restaurants had a total of 3,105 franchised or company-operated restaurants in 43 states and in 13 countries, including 1,087 Carl's Jr. restaurants, 1,906 Hardee's restaurants and 96 La Salsa Fresh Mexican Grill locations.