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Tim Hortons profit rises, but falls short of expectations

File photo of a doughnut case in a Tim Horton's location in Caledon, Ont.

j.p. moczulski The Globe and Mail

Tim Hortons Inc. first-quarter earnings increased by 5.5 per cent as the company benefited from the addition of new stores in Canada and a better product mix and pricing in the United States although the improvement was not enough to beat analysts' expectations.

The coffee and doughnut giant posted net profit of $90.9-million or 66 cents per share in the quarter, compared with $86.2-million or 56 cents in the year-earlier period.

Revenue was $766.4-million, up 4.8 per cent from $731.5-million.

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The consensus analysts' estimates for the first quarter were 68 cents EPS and $772.85-million in revenue.

Same-store sales growth in Canada in the quarter was 1.6 per cent and in the U.S. it was 1.9 per cent.

A total of 23 restaurants were opened in Canada in the quarter, 11 in the U.S., the company said on Wednesday.

"We made continued progress in the first quarter as we focused on aspects of our business where we could make an immediate impact, including simplifying our operations, enhancing our restaurants and introducing menu innovations," said president and chief executive officer Marc Cara.

EPS of 66 cents grew by 16.9 per cent due to the expanded share buyback program, which resulted in a decrease of 15 million shares outstanding, on average, versus the first quarter of 2013, the company said. And corporate reorganization expenses negatively affected EPS by five cents in the first quarter of 2013.

Tim Hortons' board declared a dividend of 32 cents per common share.

The company said in February it planned to open 800 restaurants in North America – 500 in Canada – and 220 in the Middle East.

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Corporate strategy to deal with the challenges of a slow-growth industry and tough competition includes broadening customer purchases beyond just coffee and a doughnut as well as speeding up service.

Oakville, Ont.-based Tim Hortons is one of the largest publicly traded restaurant chains in North America based on market capitalization and the biggest in Canada.

It has 4,524 system-wide restaurants, including 3,610 in Canada, 870 in the U.S. and 44 in the Gulf Co-operation Council.

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