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A server pours a cup of coffee at a Tim Hortons in Toronto in this file photo. (Chris Young/THE CANADIAN PRESS)
A server pours a cup of coffee at a Tim Hortons in Toronto in this file photo. (Chris Young/THE CANADIAN PRESS)

Tim Hortons sales growth hampered by economy, competition Add to ...

Pressure in the highly competitive fast-food market and still-soft economy has been putting a dent in Tim Hortons Inc.’s sales so far this year.

The company said in notes to its fourth-quarter results Thursday that the challenges it faces from rivals in North America have hurt its same-store sales growth. Same-store sales compare sales of outlets open one year or more.

Tims also said it’s hiking its quarterly dividend and buying back up to $250-million in common shares.

“We have experienced weakness in same-store sales growth thus far in 2013, due mainly to a continued challenging economic environment and the resulting intensified competitive environment, and unfavourable weather conditions,” the company said in a news release.

“We expect weaker same-store sales growth in the first quarter due to these factors and strong prior-year comparables, as same-store sales growth rates in the first quarter of 2012 were 5.2% in Canada and 8.5% in the U.S.” That compares with 2.6 per cent in Canada and 3.2 per cent in the U.S. in the first quarter of 2013.

For 2013, the coffee-doughnut and fast-food chain says it expects same-store sales growth of 2 to 4 per cent in Canada and 3 to 5 per cent in the U.S.

The Oakville, Ont.-based company said it booked net profit of $100.3-million or 65 cents per share in the fourth quarter, compared with $103-million or 65 cents in the year-earlier period.

The 65 cents EPS was below the 72 cents consensus analysts’ estimate.

Revenue in the quarter was $811.6-million, up from $779.8-million, but below the analysts’ estimate of $827.3-million.

The company said total costs and expenses in the fourth quarter were up 5.5 per cent. Termination costs and professional fees that were part of the corporate reorganization resulted in $9-million in related expenses, which reduced fourth-quarter EPS by 5 cents.

For the year, the company posted net profit of $402.9-million or $2.59 per share, up from $382.8-million or $2.35 per share in the year-earlier period.

On a full-year basis, same-store sales growth of 2.8 per cent in Canada was below the company’s previously stated target range of 3 per cent to 5 per cent.

“We believe the economic conditions and resulting intensified competitive environment were a factor, and that initiatives currently under way, including menu innovation and efforts to increase restaurant capacity, will help address these challenges,” the company said.

Tim Hortons also said it’s increasing its quarterly dividend by 23.8 per cent, to 26 cents from 21 cents and that it will repurchase of up to $250-million in common shares.

Meanwhile, the company says it expects to appoint a new chief executive officer by early summer.

Tims said its board has made “significant progress in both its reorganization and CEO succession processes. We expect to have substantially completed realigning roles and responsibilities within our new structure by the end of the first quarter of 2013.”

Executive chairman Paul House took over as temporary CEO in May of 2011 after the surprise departure of Don Schroeder, who had in turn replaced Mr. House in 2008.

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