* Q1 EPS C$0.48 vs analysts' forecast C$0.51
* Sees meeting full-year EPS target
* Canada same-store sales up 2 pct vs 5.2 pct year earlier
* Shares fall 5 percent
(Adds comments from conference call, details; updates share
By S. John Tilak
TORONTO, May 12 Tim Hortons Inc's THI.TO
THI.N quarterly profit rose less than expected as the coffee
shop chain spent heavily on promotions, while snowy weather
held back Canadian sales growth, sending its shares tumbling.
Tim Hortons, whose brand is virtually synonymous with
coffee in its home market, said on Thursday it gave away more
prizes than usual in its annual Roll Up The Rim contest,
increasing its costs and crimping earnings.
Sales at stores open at least a year, a key measure for
retailers, slowed to 2 percent in Canada from 5.2 percent a
year-earlier period, as severe winter weather kept some
customers away from the country's No.1 restaurant chain.
The Oakville, Ontario-based company is having trouble
keeping up the pace after several years of strong same-store
growth, said Edward Jones analyst Brian Yarbrough. He said
same-store sales have risen for the past 12 years.
"Eventually those comparisons just get tough," he said.
"Year on year on year, at some point it just gets very
difficult to continue to put up 4 or 5 percent same-store sales
First-quarter same-store sales rose 4.9 percent in the
United States, a much smaller market for Tim Hortons. Much of
the increase there reflected higher prices for the coffee and
baked goods it sells. The company is investing in marketing and
advertising to boost brand awareness south of the border.
Tim Hortons, the fourth-largest publicly traded restaurant
chain in North America, competes with McDonald's Corp (MCD.N)
and Dunkin' Donuts, as well as with Starbucks (SBUX.O) and
Second Cup (SCU.TO), a Canadian coffee shop chain
HIGHER MENU PRICES
First-quarter earnings rose to C$80.7 million ($83.2
million), or 48 Canadian cents a share, from C$78.9 million, or
45 Canadian cents, in the year-before quarter. Analysts, on
average, were looking for 51 Canadian cents, according to
Thomson Reuters I/B/E/S.
Revenue rose 10.4 percent to C$643.5 million, topping the
average analyst forecast of C$613.8 million.
Tim Hortons restaurants boosted menu prices by an average
of 3 percent after the end of the first quarter to offset
rising commodity prices.
The company has made commodity purchases required until the
end of the year, hedging against further rises in raw material
costs, Chief Executive Donald Schroeder told analysts on a
"The unknown right now is what's happening with gasoline,"
he said. Higher gas prices will mean consumers have fewer
discretionary spending, he added. "That's a concern."
The stock was down 5 percent to C$45.68 on Thursday
afternoon on the Toronto Stock Exchange and down 5 percent at
$47.45 on the New York Stock Exchange. The stock has risen
about 17 percent in the last three months ahead of Thursday's
(Reporting by S. John Tilak, editing by Frank McGurty)