Major shareholders boost stakes in CKE

CKE Restaurants Inc., whose stock for the last 10 months has had all the appeal of yesterday’s fast food, is making its biggest shareholders salivate over a rebound inspired by a Carl’s Jr. hamburger.

Carpinteria, Calif.-based CKE, which aims to be a cheaper alternative to Ruby Tuesday Inc. and IHOP Corp.’s Applebee’s, can benefit from this “trading down” without having to cut prices to compete with McDonald’s Corp., said Dick Pickup, an independent investor in Newport Beach who is the company’s biggest shareholder.

“They haven’t tried to be a discounter,” said Pickup, who owned 4.7 million shares as of Feb. 13 and said he added a “meaningful” amount last month.

Eight of CKE’s 12 largest shareholders reported increasing their stakes in December and January regulatory filings. Allianz Global Investors of America, the third-largest, bought 1.74 million shares, while No. 9 Goldman Sachs Group Inc. bought 122,707 shares.

CKE advertises a Six Dollar Burger, which actually sells for about $4, to position itself a notch above competitors, Chief Executive Andrew Puzder said.

“We said, ‘We’re not selling a 99-cent double cheeseburger, we’re selling a Six Dollar Chili Burger,’ and our sales are up substantially,” Puzder said. Revenue at Carl’s Jr. restaurants open at least 12 months climbed 1.4% in February and 6% in March.

Sales have plummeted at casual-dining chains, falling 12% at Ruby Tuesday’s company-owned restaurants in February for locations open at least 18 months as consumers cut back on spending.

CKE shares hit a three-year low of $10.98 on March 27, after the company reported a plunge in fourth-quarter earnings to $98,000, or break-even on a per-share basis, from $10.3 million, or 15 cents, a year earlier. The stock fell 42 cents, or 3.5%, to $11.44 on Wednesday. That’s 50% below the $22.95 price hit June 15, a level not reached in more than eight years.