By Solarina Ho
TORONTO Feb 20 Canadian coffee and doughnut
chain Tim Hortons Inc reported higher-than-expected
quarterly revenue on Thursday and announced a dividend increase
and a share buyback plan.
Shares of Tim Hortons, which faced investor pressure last
year to return capital, were up 3 percent at C$59.66 ($53.90).
At Wednesday's close, the stock had fallen nearly 8 percent
since the company last reported quarterly earnings in November.
Tim Hortons, which says it sells eight out of 10 cups of
coffee in Canada, has been expanding its food menu in pursuit of
growth, but is ending its partnership with Cold Stone Creamery
in Canada, where it had performed below expectations. U.S.
locations would not be affected.
Tim Hortons has long battled Starbucks Corp in the
coffee arena. Now new menu items like steak-and-cheese panini
and jalapeno breakfast sandwich are also pitting the Canadian
company against fast-food chains like McDonald's Corp,
which has said it is pursuing "more of a coffee culture" with
its expanded McCafe products.
Tim Hortons, which is set to unveil a new five-year
strategic plan next week, has been working to improve customer
service like speeding up the order process, testing new products
like dark roast coffee, and trimming some less popular
"We needed to adapt and make changes to reposition ourselves
in order to sustain our track record of success and we need to
do this with a sense of urgency," said Marc Caira, who became
chief executive officer of Tim Hortons last summer. "I believe
we have begun to do this."
The Oakville, Ontario-based company also said it would be
making its debut in grocery stores this summer with its Keurig
K-Cup and Tassimo single-serve coffees.
In the meantime, it raised its quarterly dividend to 32
Canadian cents per share from 26 Canadian cents, higher than the
29.4 Canadian cents analysts had on average expected.
The restaurant chain, which has a significant and loyal
following in Canada, also announced that it had paired up with
Canadian Imperial Bank of Commerce, the country's
fifth-largest bank, to launch a loyalty rewards Visa credit
Fourth-quarter sales at locations open at least 13 months
increased 1.6 percent in Canada and 3.1 percent in the United
States, slowing from a year earlier but accelerating from
earlier in 2013.
Tim Hortons operated 4,485 restaurants at the end of the
quarter, including 3,588 in Canada. It also has 38 restaurants
in the Gulf Cooperation Council.
The company said it expected sales at established stores to
increase 1 percent to 3 percent in Canada this year and to rise
2 percent to 4 percent in the United States.
The company said it had closed a number of underperforming
locations in some U.S. markets to concentrate on more successful
ones elsewhere in the country.
Tim Hortons recorded charges of C$6.6 million for the
restaurant closures and C$19 million for its Canadian split with
Cold Stone Creamery.
Net income attributable to Tim Hortons edged up to C$100.6
million from C$100.3 million a year earlier. On a per-share
basis, earnings rose to 69 Canadian cents per share from 65
cents, bolstered by share buybacks.
Analysts on average had expected a profit of 76 Canadian
cents per share, according to Thomson Reuters I/B/E/S.
Results were below analysts' expectations, BMO Capital
Market's Peter Sklar said, but he added that the profit was
slightly ahead of forecasts when adjusted for the unexpected
charges as well as an unusually low tax rate during the quarter.
Revenue rose 11 percent to C$898.5 million. Analysts had
forecast C$836.8 million.
The company forecast a 2014 profit of C$3.17 to C$3.27 per
The C$440 million share buyback announced on Thursday
consists of the remaining portion of a program to repurchase up
to C$1 billion in stock through August, plus an additional
amount of about C$200 million, the company said.