* Q3 profit C$0.68/share vs analyst view C$0.72
* Revenue up 10.3 pct at C$802.0 million
* Traffic lower in Canada and the United States
TORONTO, Nov 8 Tim Hortons Inc reported
an increase in quarterly profit and sales on Thursday, but its
share price fell as the results showed traffic in Canada and the
United States was hit by a tougher economic environment.
Sales at established stores rose by 1.9 percent in Canada,
where Tim Hortons is the dominant coffee-and-snacks chain, and
by 2.3 percent in the United States in the third quarter as
customers spent more during each visit, but those figures were
lower than in previous quarters.
"I'm not overly concerned, but definitely we would like to
see same-store sales...re-accelerate back to that kind of 3
percent plus level, longer term," Edward Jones analyst Brian
Yarbrough said of the Canadian numbers.
Same-store traffic dropped as fragile consumer confidence
held back discretionary spending, the company said, noting that
"the challenging economic conditions led to an intensified
The comments recalled competitor McDonald's Corp's
last quarterly earnings report, when t he U.S. chain's chief
executive attributed weak sales growth to a tough battle for
customers in a fragile economy. On Thursday, McDonald's reported
its first decline in monthly same-store sales since 2003.
COMPETITION IN CANADA
Yarbrough said the prospect of tougher competition from
McDonald's has been weighing on Tim Hortons' stock.
McDonald's has been touting recent market share gains in
Canada, and in October its Canadian chief told Reuters that his
division is stepping up its expansion after holding back for
more than five years.
Analysts are watching restaurant traffic in Canada closely
to gauge whether Tim Hortons can hold off competitors and keep
growing in its home market. It is selling more products that
carry premium prices, such as lattes and panini sandwiches, and
that helped support third-quarter profit and sales.
The chain is ubiquitous in Canada, claiming eight of every
10 cups of coffee sold. But as it expands its food offerings,
especially at lunch, it is increasingly going head to head with
McDonald's and its fast-food peers.
McDonald's has been promoting its coffee aggressively in
Canada, with giveaways and remodeled stores that are more cafe
than burger joint, featuring soft seating and even fireplaces.
SAME-STORE SALES TREND
Tim Hortons said same-store sales growth is trending a bit
below its full-year target of 3 to 5 percent, but it expects new
products to help offset weak consumer confidence in the current
Tim Hortons' net income rose to C$105.7 million ($106.2
million), or 68 Canadian cents a share, from C$103.6 million, or
65 Canadian cents, a year earlier.
Earnings were hurt by a charge of C$8.6 million, or 4
Canadian cents a share, related to a previously announced
Analysts, on average, had been expecting 72 Canadian cents a
share, according to Thomson Reuters I/B/E/S.
Revenue rose 10.3 percent to C$802.0 million, compared with
analysts' average forecast of C$794.6 million.
The company's effective tax rate fell to 26.7 percent from
29.0 percent in the year-earlier quarter.
Shares were down 3.1 percent at C$47.95 on Thursday morning
on the Toronto Stock Exchange.