CKE to Sell at Least 350 Carl’s Jr., Hardee’s Eateries : Restaurants: Proceeds will be used for remodeling outlets. Company also posts 54% drop in profit for its second fiscal quarter.

Anaheim-based CKE Restaurants Inc. said Thursday that it plans to sell at least 350 of its Carl’s Jr. and Hardee’s restaurants in the next year, then use the proceeds to speed up a restaurant remodeling effort that has sapped earnings.

While announcing its move to sell 10% of the company-owned outlets to existing or new franchisees, CKE also posted a 54% decline in profit for its second fiscal quarter.

For several quarters, CKE has said the slow pace of remodeling money-losing Hardee’s burger restaurants has taken a toll on its bottom line. In the process, the stock has been battered, falling 71% so far this year.

The company is recasting Hardee’s as Carl’s Jr. and Star Hardee’s, which feature improved menus and more service.

“The sales will help us raise capital to use in our Star Hardee’s remodel program,” Chairman and Chief Executive William Foley II said. “We think this is a prudent step in accelerating the recovery at Hardee’s without increasing debt levels.”

The company has sold off units in the past, but this is the largest number of sales planned at one time, said CKE spokeswoman Suzie Brown.

The sales also are aimed at easing some of the operational pressures CKE encountered when it acquired Hardee’s two years ago, adding hundreds of restaurants.

CKE initially purchased 780 stores when it acquired the Hardee’s chain in July 1997. The company then acquired 65 more from franchisees in the next nine months.

But the biggest leap in company-owned Hardee’s occurred in April 1998, when CKE bought 557 restaurants from South Carolina-based Advantica Restaurant Group.

“The acquisitions have created operational challenges and put pressure on corporate support groups,” Brown said. “By selling some of the restaurants, we are getting closer to a balance that we began with.”

The company currently owns 556 of the 890 Carl’s Jr. restaurants and 1,414 of the 2,786 Hardee’s.

It did not specify how many Carl’s Jr. and how many Hardee’s restaurants will be sold. CKE executives also did not say how much revenue they hope to raise by selling the units.

The reduction in company-owned outlets could reduce CKE’s operating profit initially, but those declines can be offset in the long run, said restaurant industry analyst Janet Lowder, president of Restaurant Management Services.

“If you take company stores and franchise them, it increases your capital very quickly and you still have a stream of income through royalties and leasing agreements,” she said.

For the three months ended Aug. 9, CKE’s net income fell to $10.3 million, or 20 cents a share, from $22.6 million, or 42 cents, in the year-earlier period.

The results were in line with estimates of analysts surveyed by First Call Corp. The analysts had lowered their estimates by 13 cents last month after the company warned that profit would fall below expectations. Revenue fell 2% to $465.3 million.

Sales declined 4.9% at company-operated Hardee’s restaurants open at least a year. These so-called same-store sales at company-operated Carl’s Jr. restaurants fell 4.3%.

Both Carl’s Jr. and Hardee’s restaurants face formidable competition in the burger business from competitors such as industry leader McDonald’s and the Burger King and Wendy’s International chains. Last month, Carl’s introduced two menu items--the sourdough bacon cheeseburger and sourdough breakfast sandwich. But CKE said sales of those items will not show up in financial results until the third quarter.

The company’s stock closed Thursday at $8.31 a share, off 19 cents, on the New York Stock Exchange.

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Bloomberg News was used in compiling this report.