Carl’s Jr. and Hardee’s will be increasingly pressured by rising food costs, but officials at parent CKE Restaurants Inc. said they remain reluctant to pass those costs onto consumers.
Andrew Puzder, chief executive of Carpinteria, Calif.-based CKE Restaurants, discussed the focus on pricing in a call to analysts Wednesday following the release of third quarter results — the company’s first full quarter as a private company following the acquisition in July by Columbia Lake Acquisition Holdings Inc., an affiliate of Apollo Management VII LP.
CKE said food and packaging costs at corporate units rose 130 basis points during the third quarter, largely a result of higher commodity costs for beef, pork and cheese, which the company expects will continue into 2011.
Puzder said the company will be “watching what competitors do” in terms of pricing, and he predicted the brands that have been driving sales through discounting will likely raise prices next year.
However, at Carl’s Jr. and Hardee’s — two brands known for their premium burgers — Puzder said consumer perception is that “prices are already high.”
For the quarter ended Nov. 1, CKE posted a loss of $330,000, compared with a year-ago profit of $6.2 million, on higher interest expense.
Revenue in the latest quarter fell 12.2 percent to $284.5 million, in part because of the sale of the Carl’s Jr. distribution business in July. Excluding that sale, revenue would have been up 1.5 percent, the company said.
Blended same-store sales at corporate stores rose 0.9 percent, reflecting an 8.3-percent increase in same-store sales at Hardee’s and a 5-percent decline at Carl's Jr.
While Hardee's has seen nine consecutive periods of positive sales, sister brand Carl's Jr. continues to struggle amid weak economic conditions in its core market of California.
High unemployment, in particular, has hit the Carl’s Jr. core audience of “young, hungry guys,” Puzder said.
Among franchisee-owned units, same-store sales for the quarter were down 4.3 percent at Carl’s Jr. and up 7.4 percent at Hardee’s.
CKE also said transactions were down 3 percent at Carl’s Jr. during the quarter, but up 3.3 percent at Hardee’s.
Five weeks into the fourth quarter, , Puzder said blended same-store sales at company units were tracking positive in the “low-single-digit” range.
CKE operates or franchises 1,245 Carl’s Jr. and 1,896 Hardee’s locations worldwide.
Contact Lisa Jennings at [email protected].