(Adds stock price, expects increase in U.S. same-store sales
growth outlook, comments from CEO and analysts)
By Susan Taylor
TORONTO Aug 6 Tim Hortons Inc ,
the Canadian coffee and doughnut chain, said on Wednesday that
market-beating quarterly growth shows a shift in strategy is
paying off and that full-year profit and U.S. sales growth could
exceed its targets.
Customers spent more money on higher-priced and new menu
items, such as crispy chicken and turkey sausage sandwiches, the
company said, which buoyed sales at established restaurants.
The trend is expected to continue this year, said the
Oakville, Ontario-based company, whose shares jumped nearly 6
percent in early trade.
Tim Hortons outlined a plan in February to kick-start growth
and improve returns by fine-tuning its menu to encourage
increased spending, improving service and opening new restaurant
"Guests have been responding favorably," Chief Executive
Marc Caira said in a statement.
The fast-food operator, which has struggled with U.S.
expansion efforts in recent years, is fending off mounting
pressure on its home turf from well-capitalized rivals such as
McDonald's Corp and Starbucks Corp.
Second-quarter sales at Canadian restaurants open for at
least 13 months rose by 2.6 percent, and by 5.9 percent for U.S.
locations. BMO Capital Markets analyst Peter Sklar said that was
well ahead of his expectation for 1.5 percent growth in Canada
and a 2.3 percent gain in the United States, as pricing, menu
changes and product mix boosted the average bill.
For a ninth consecutive quarter, same-store transactions
dropped in Canada, a declining traffic trend that is cause for
caution, said Canaccord Genuity analyst Derek Dley.
The company now sees 2014 earnings per share at the high
end, or slightly above, its target range of C$3.17 to C$3.27.
Sales growth at established restaurants in the United States are
now seen near the top, or slightly above, a target of 2 percent
to 4 percent.
Tim Hortons, which serves nearly three of every four cups of
coffee sold in Canada, said net income was flat at C$123.8
million ($112.8 million) in the quarter ended June 29. Profit
rose on a per share basis to 92 Canadian cents, from 81 Canadian
cents, as the company bought back shares in the quarter.
Revenue rose 9.3 percent to C$874.3 million.
Analysts, on average, had expected earnings of 87 Canadian
cents per share on revenue of C$843.3 million, according to
Thomson Reuters I/B/E/S.
Tims, as it is affectionately called in Canada, plans to
open at least 800 new restaurants over the next five years as it
seeks to secure its dominance in Canada and boost returns in the
Shares rose C$3.54 in opening trade on the Toronto Stock
Exchange on Wednesday to C$63.62, a 10-month high.
($1 = 1.0974 Canadian dollars)
(Additional reporting by Ashutosh Pandey in Bangalore; Editing
by Savio D'Souza and Grant McCool)