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Fat Burgers, Lean Profits

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With provocative ads and massive burgers, Hardees, and Carl’s Jr. used to connect with their customers rather well. But after years of success, parent CKE Restaurants (CKR) has fallen on hard times, down 21% this year. Why?

CKE Restaurants Chief Executive Andrew Puzder joins the panel for this conversation. Following is a synopsis of his main points.

Your company has lagged McDoanld’s and YUM. What’s going on?

“It would be great if the dollar got a little stronger,” says Puzder. “We’re under-penetrated (internationally) as compared to the others and we have increasing commodity costs. And we own a fairly large percentage of our restaurants as compared to McDonald’s or YUM so when commodity costs go up, it hits margins. If you’re a franchisor… you don’t get hit as bad."

He adds, Although the weakness of the dollar has hurt us a little, we’ve taken some moves to raise prices and we’ve narrowed the gap on our margins."

Can you accelerate performance in the face of currency weakening and soft commodity price increases?

“For us they are the same variable,” Puzder says. “You end up with potatoes being very expensive right now because the Chinese are buying them – because the dollar is so low. What we have to do.. is raise prices.

He adds, "We’re the premium priced brand because we use better ingredients.. so we raise our prices a little more slowly than the other guys. But everyone is raising prices.”

Dylan Ratigan ask the panel what they think of CKR?

The traders aren’t terribly excited by this stock.


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