The market is discounting the stock of premium-priced Thickburger purveyor CKE Restaurants
Hey, net income did shoot up by 52% to $16 million. Notably, since it pertains to the increase, the company's costs associated with store closings fell from $6.3 million to $0.6 million on a pre-tax basis. Further, sales increased at a moderate 1.5% to $371 million.
Ah, but the real story is not what the company did last quarter. What stinks up the kitchen are recent same-store sales results. CKE posted same-store sales growth, but it fell from 9.8% for the comparable period a year ago to 2.4%. So sales are up, but the rate of increase is way down.
This downward trend was also evident in last year's fourth-quarter results.
So, what about CKE's 2,029 Hardee's stores? For the five sales reporting periods completed this year, same-store sales have fallen from an impressive 10.5% gain for the comparable periods a year ago to a meager 0.1% gain this year.
The falling rate of U.S. same-store sales growth is evident elsewhere in the fast-service burger industry's quarterly results. McDonald's
So if Sonic's marketing did so well, why didn't CKE's widely covered advertising campaign boost its sales? That is one reason to be concerned about future sales.
Also worth considering is the premium burger from Jack in the Box
Pricing the stock at 15.4 times forward earnings, analysts expect that the company will earn $0.92 a share this year. But given the same-store sales trend, a new case of mad-cow disease, and high prices for gasoline and beef, that earnings estimate might just be too high. The stock's price already is.
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