CKE: High unemployment hurt Carl’s Jr.

CARPINTERIA Calif. High unemployment in California was blamed for a 5.1-percent decline in same-store sales among company-operated Carl’s Jr. units for the first quarter of 2010, though sister chain Hardee’s reported an increase of 2.5 percent, parent company CKE Restaurants Inc. reported Wednesday.

About 362 restaurants, or 87 percent of the company-operated stores within the 1,195-unit Carl's Jr. chain, are located in California, where the unemployment rate hit 11 percent in April, up from 6.6 percent in April last year.

Andrew Puzder, CKE’s chief executive, said it was not surprising that the economic environment would negatively impact results for Carl’s Jr. “since our brand remains one of the only sizeable hamburger fast-food chains that has resisted the temptation to generate short-term sales with a heavily discounted, low-quality, value menu.”

While CKE has long resisted engaging in discount wars with quick-service competitors, Puzder said the company is “striving to increase awareness of both the non-core and lower-priced products on our menus without resorting to margin-eroding deep discounting practices.”

Puzder said both chains would continue to focus on new product introductions to improve sales, but the company would continue to “tough it out” to protect brand image, food quality ratings and profitability.

“When California’s economy begins to recover, we will continue to be well positioned as the taste and quality leader for our segment,” said Puzder.

For the quarter ended May 18, blended same-store sales for both brands declined 1.8 percent —compared with a 1.8-percent increase in the prior-year first quarter — and company officials said they expect restaurant operating costs to be flat compared with the first quarter of 2009, with lower food and labor costs offsetting higher occupancy costs.

Revenues were down about 1.6 percent to $192.1 million at company-owned Carl’s Jr., compared with $195.3 million the prior-year first quarter. The 1,908-unit Hardee’s chain reported revenues of $151 million for company-owned units, compared with $162.9 million the first quarter last year.

Full first-quarter results are expected on June 24.

Contact Lisa Jennings at [email protected] [3].