CKE Restaurants: Getting a Boost from Good News

CKR shares have staged a nice comeback, rallying almost 20% in just the last week alone. The stock had been in recent turmoil, touching a new 52-week low, as ample sellers appeared eager to dump at any price. CKR's extremely oversold condition finally prompted Bargain-Hunters and Shorts (who need to buy back their short positions to lock in profits) to get into the buying mood.

Short covering and Bargain-Hunting provided some of the fuel necessary for a relief rally , but the bulk of the buying was more likely the product of three key news releases:

1. The company reported a 1.8% increase for its period "4" Same Store Sales, as well as a 1.9% increase in Same Store Transactions. 
2. It revealed cost trends that were better than expected for 1st quarter 2009, with food and packaging costs expected to be flat at 29.4% of sales, labor costs to be 10 basis points higher at 29.1%, and occupancy costs estimated at 30-40 basis points higher, ringing in at 21.9% of sales. These price increases are minimal when you consider the overall elevated increases in commodity and fuel prices this past year.
3. It announced a new advertising campaign that focuses on a reality TV format by launching "Fakerestaurant.com"—an advertising strategy intended to reveal Diner's true observations and reactions when eating CKR burgers in a fake "high class" restaurant . The "hoodwinked" patrons are then recorded under hidden camera and are stunned when learning the Burger just consumed was actually a Hardee's "Thickburger" or a Carl's Jr. "$6 Burger"- pure genius to jump on the TV reality bandwagon while it's still red hot.