New menu items and new menu pricing drove first-quarter same-store sales for Carl’s Jr. and Hardee’s despite continuing economic challenges in key markets like California, parent company CKE Restaurants Inc. said Wednesday.
In a call to investors and analysts following CKE’s first-quarter earnings report on Tuesday , the company said the chains began increasing prices to offset rising commodity costs. They did not specify the price hike amount.
“You can’t not take pricing in this environment,” said Andrew Puzder, chief executive of the Carpinteria, Calif.-based CKE Restaurants Inc.
But given that consumers are still sensitive to pricing, “it’s difficult to take price increases quickly enough” to offset the rising costs of beef, cheese, pork, oil and flour, he added.
Commodity costs increased between 5.5 percent and 6 percent year-over-year during the quarter. The company did not make inflation expectations for the rest of the year.
Puzder said he was pleased with the 2.1-percent increase in same-store sales for corporate Carl’s Jr., in particular. The 1,262-unit chain has 85 percent of its units in California, which still struggles with high unemployment rates.
An increase in average checks at Carl’s Jr. to $6.97, compared with an average check of $6.79 for the same quarter last year, drove the sales increase. Transactions decreased by 0.1 percent during the quarter, the company reported.
For the 1,909-unit Hardee’s, same-store sales increased 9.6 percent at corporate locations, the highest increase since the first quarter of fiscal year 2005 when same-store sales rose 11.5 percent.
Puzder said the recent quarter’s increase at Hardee’s was based on a 3-percent increase in transactions and an increase in the average check to $5.30, compared with $5.00 for the same time a year ago.
The increase in menu pricing contributed to average check increases, Puzder said, but so did the promotion of a new turkey burger for both brands, a higher priced item that has been performing well.
Hand-breaded chicken tenders and a new chicken sandwich made with a hand-breaded fillet, available at both Carl’s Jr. and Hardee’s, have also contributed to the rise, the company noted.
Chicken prices haven’t accelerated as quickly as beef, and the company’s chicken pricing is fixed for the year.
The new poultry products also offer room for product line expansion, Puzder noted. The teriyaki version of the turkey burger, for example, “is even better than our beef version,” he said.
Puzder said he hasn’t seen economic trends improving in California in recent weeks.
“Unemployment rates haven’t come down, and that’s the important metric for us,” he said.
“But we did better,” he added. “We’re still not at the level of 2006, 2007, 2008, but we did better. To be up a couple percentage points is encouraging.”