These are not the best of times for the iconic brand of Tim Hortons Inc.
Competition is intensifying as aggressive players such as Starbucks Corp. and McDonald's Corp. ramp up their offerings. Growth in Tim Hortons' core Canadian market is flat. The coffee-shop giant's U.S. foray has been less than impressive. And there's growing heat from two impatient American hedge funds seeking a big improvement in performance.
Welcome aboard, Marc Caira.
As the newly installed chief executive officer, Mr. Caira is set to conduct his first conference call with analysts on Thursday to discuss the company's second-quarter results.
With only about a month on the job, he's not expected to unveil a grand turnaround strategy yet. But analysts and investors will be listening closely for signs indicating where Mr. Caira – a food industry veteran who had a long career at Nestlé SA but has no direct experience in the retailing, restaurant or franchise businesses – wants to take the chain.
One key issue: Will Tim Hortons bow to calls from U.S. investors Scout Capital Management LLC and Highfields Capital Management LP to pull back on the costly U.S. expansion, or for a share buyback or dividend increase?
"It will be interesting to hear if [Mr. Caira] does have any insights into what the strategy is going forward given the pressure being put on by investors," Canaccord Genuity analyst Derek Dley says.
There have been suggestions that the company could take on new debt to finance a share buyback; that option will likely be addressed on the call, Mr. Dley said in a recent research note.
Mr. Dley is forecasting second-quarter earnings before interest, taxes, depreciation and amortization (EBITDA) of $194-million, up from $190-million the same period previous year, and earnings per share of 72 cents, up from the year-earlier 70 cents but below the consensus forecast of 75 cents.
He said competition remains "fierce," with Starbucks reporting a 9-per-cent increase in North American same-store sales. "We believe traffic at Tim Hortons will remain challenged and are forecasting flat same-store sales in Canada, and a 1.5-per-cent increase in the United States," he said.
Same-store sales is a measure of performance at outlets open for one year or longer. Tim Hortons had 808 stores in the United States and 3,453 shops in Canada at the end of the first quarter.