CKE Lowers Outlook, Takes Stock Hit

CKE Restaurants Inc. reported a fiscal second-quarter profit, reversing a year-earlier loss, but also lowered expectations for its fiscal year, sparking a 25% drop in its stock price Thursday.

Citing strong results at its Carl’s Jr. fast-food chain, the Santa Barbara company posted net income of $10.8 million, or 18 cents a share, for the quarter ended Aug. 12, compared with a net loss of $36.8 million, or 73 cents a share, for last year’s second quarter.

The company, which was formerly headquartered in Anaheim and still has Orange County operations, forecast fiscal 2003 earnings at 50 cents to 52 cents a share, saying it is still six months away from unveiling a “comprehensive” plan to drive sales at its Hardee’s chain, which it acquired in 1997. The company had been expected to earn 59 cents, according to an average estimate by three analysts polled by Thomson First Call.

“The company’s doing the right thing,” said Avondale Partners analyst Amy Greene. “I’d rather them be prudent than aggressive with us. There are lot more pieces to the rebranding and marketing campaign than they had previously anticipated, so its going to take longer to get it done.”

The company reported total revenue of $337.2 million, down from $340 million for last year’s second quarter.

CKE stock dropped $1.81 to $5.49 a share on the New York Stock Exchange.

Some analysts said the market was overreacting to the company news.

“It’s a difficult environment for all the restaurant operators,” said Fulcrum Global Partners analyst Greg Schroeder.

“Everyone is experiencing a slowdown in traffic, so I think this company’s being overpenalized. But it’s a turnaround story and you need to have confidence that Hardee’s is moving in the right direction, and we did not have that confirmation today,” Schroeder said.