CKE Restaurants: At A Discount To Its Peers

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CKE Restaurants (CKR) is one of the largest quick service restaurants in the country with 1,141 Carl’s Jr. locations in the West and 1,926 Hardee’s units in the Midwest. It offers premium burgers such as the Angus Thickburger or the Six Dollar Burger aimed at satisfying the cravings of young, hungry males.

Its TV commercials have earned a reputation for cutting edge humor and irreverence such as Paris Hilton‘s stint at eating a burger while washing a car or the tagline ‘don’t bother me, I’m eating’.

The high cost of fuel and commodities have thrown a damper on fiscal 2008 earnings, as CKR saw its bottom-line slashed by more than 33%. Earnings for fiscal year 2008 were $31 million on revenues of $1.53 billion versus earnings of $50 million on revenues of $1.54 billion in 2007. CKR has ample room for improvement, as a dismal 2 cents of every dollar sold fell to the bottom line. CKR’s Hardee’s units require the most attention as their restaurant operating costs as of a percentage of sales are a whopping 85.7%, more than 700 basis points higher than Carl’s Jr.‘s 78.6% rate. The combination of growing revenues and cutting costs at Hardee’s is just what the Dr. ordered, but will the patient improve?

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