Thread: Tim Hortons
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Old 08-07-2009, 08:46 PM   #21
Join Date: May 2000
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Default Re: Tim Hortons

Success of coffee, ice cream combo opens the door for more U.S. stores

Tim hortons turns in `robust' U.S. performance but may hike prices in Canada to hit year-end goals

Aug 07, 2009 04:30 AM

Dana Flavelle
Business Reporter
Cheap coffee and super-premium ice cream. Who would have thought that would be a match made in heaven?

The marriage of Tim Hortons Inc. and Cold Stone Creamery, the United States' sixth-largest ice cream vendor, is going so well that the coffee and doughnut chain says it may open more than the 50 stores it planned for this year.

The partnership, announced last February, is one of the reasons Hortons' business is picking up in the U.S., where the Canadian icon faces better-known rivals.

The company as a whole managed to carve out moderately higher profits and sales, despite an economic downturn and stiffer competition in Canada from second-ranked McDonalds Restaurants.

However, it cautioned that it may have to raise prices in Canada to meet its year-end goals.

"Nothing has been announced at this point," president and chief executive Don Schroeder said on a conference call with analysts.

Calling the company's U.S. performance "robust," Schroeder said it also reflected the introduction of new menu items, price discounting and the partnership with the Texas-based ice cream vendor.

The concept, in which the two restaurant chains sell each other's products, is also being tested in Canada, with half a dozen stores so far and another six in the works.

However, things aren't so rosy in Hortons' home market.

Canadian franchisees face an unusual combination of higher cost pressures and economically strained customers, Schroeder said, adding the company may increase prices in some regions.

The decision will depend partly on what happens to gas prices this fall as they have a direct impact on consumers' discretionary income, the company added.

Strong competition from McDonald's, which is forcing Hortons to use more price discounting, is hurting its Canadian performance, analyst Perry Caicco, of CIBC World Markets, noted in an earlier report.

Same-store sales, a key indicator of performance, grew 1.7 per cent in Canada, versus a 5.7 per cent hike in the year-earlier period.

They rose 3.3 per cent in the U.S., versus 3.1 per cent last year.

The results don't include the impact of Hortons' high-profile move into the Manhattan market, which occurred in July, after the quarter closed.

For the company as a whole, profit rose 3.7 per cent to $77.8 million, or 43 cents a share, in the latest three-month period. That result was driven partly by its higher U.S. performance.

Revenue rose 8.9 per cent to $556.1 million, the company said, as rent, royalties and distribution grew.

Systemwide sales, which include franchisees' sales, grew 5 per cent, excluding the effects of fluctuating exchange rates.

The company opened 25 new locations during the quarter, including 15 in Canada and 10 in the U.S.

Hortons took a $2.7 million hit on its operating income as it began reorganizing itself as a Canadian public company, after several years as a registered U.S. firm.

The company operates 2,939 restaurants in Canada and 536 in the U.S.

Cold Stone Creamery has 1,400 locations.
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