Tim Hortons has shown a knack for knowing how to please its customers over the years. So it's not surprising that analysts expect some good news when the chain, which has been without a permanent chief executive officer since the sudden departure of Don Schroeder last May, reports fourth-quarter results on Thursday.
Never mind that Timmy's already has a 75-per-cent share of the quick-service restaurant coffee business – it launched a new espresso-based drink, Cafe Favourites in the fall. The drink, dispensed with the push of a button, is expected to have enticed existing coffee customers to trade up, and Starbucks customers in search of a cheaper alternative to pricey lattes to trade down. The launch of a new lasagna dish is also expected to help sales. The two product launches, price increases and holiday promotions should lead to strong sales growth from existing stores of 5.5 per cent in Canada and 5 per cent in the U.S. over the same period a year earlier. System-wide sales are expected to rise by 6.3 per cent to $1.5-billion, with earnings of 63 cents a share, up by 21.6 per cent year over year, CIBC World Markets analyst Perry Caicco forecasts.
That is all well and good, but what investors would love more would be some really good news out of the U.S., where Tim Hortons should have the best long-term prospects – but where its growth efforts have disappointed.
The problems there include minimal brand awareness, anemic promotions, less-than-ideal sites and a largely unproven franchise model, Mr. Caicco said in a recent note. It also faces the mighty Dunkin' Donuts chain, which has been "particularly aggressive in its real estate expansion strategy," said Raymond James analyst Kenric Tyghe.
So while the earnings may be solid, the best news investors could get is the naming of a new CEO – preferably one with a track record of growth in the U.S. quick-service restaurant business.