NEW YORK Hedge fund Ramius LLC has criticized CKE Restaurants Inc.'s financial strategy in a letter sent Tuesday to the parent of the Hardee's and Carl's Jr. chains. The letter came two days before CKE is scheduled to hold its annual shareholder meeting.
Ramius, which through its affiliates holds a 3.6-percent stake in CKE, urged the restaurant company to cut operating costs and its capital spending plan in order to improve shareholder value.
"We recognize the difficulties of operating in today's economic environment, however, we feel it is unacceptable for management and the board to stay the course and continue to blame the company's poor operating performance on economic issues out of its control," Ramius officials said in the letter.
CKE chief executive Andrew F. Puzder responded late Tuesday night, asserting in a letter to Ramius principals Robert M. Kaynor and Jeffrey C. Smith that the company has always been attentive to the hedge fund's concerns. Puzder cited "frequent discussions" with the two in the past, and wrote that CKE is "always open to addressing shareholder concerns. We have done so many times with Ramius and others and will continue doing so in the future."
But, Puzder said, "we have previously informed you that we are constrained in our dialogue with respect to the issues raised in your letter." He noted that regulatory rules prevent the company from disclosing certain information prior to the release of quarterly financial results on Wednesday.
For its fiscal 2008 ended Jan. 28, CKE reported a 38-percent drop in profit, to $31.1 million, or 50 cents per share, on revenue that fell 0.5 percent to $1.53 billion. At the time, company officials blamed higher commodity and energy costs, a weak dollar, and minimum wage increases for the profit drop.
Ramius urged CKE to cut overhead costs by consolidating its three offices into the main corporate headquarters in Carpinteria, Calif. Carl's Jr. and Hardee's are based in Anaheim, Calif., and St. Louis, respectively. The fund also blasted the company for having a capital spending plan that is "too aggressive and unwarranted" in the current economic environment.
Ramius said it would urge other shareholders to vote against all four of the board directors who are up for re-election at the annual shareholder meeting on Thursday. Among those directors up for re-election is CKE president and chief executive Andrew Puzder.
ANew York-based hedge fund, Ramius has pushed for strategic changes at other restaurant companies. Earlier this year, the fund lost a proxy battle over board seats with cafeteria operator Luby's Inc. Ramius had criticized Luby's management for failing to boost shareholder value.