Tim Hortons Posts Flat Q2 Profit, But Results Beat View

(RTTNews) - Canadian quick-service restaurant chain Tim Hortons Inc. (THI.TO, THI) on Wednesday reported a profit for the second quarter that was flat with last year, as higher revenues and same-store sales growth were offset by the impact of increased interest expense and a higher effective tax rate. However, results for the quarter beat analysts' estimates.

Looking ahead to fiscal 2014, Tim Hortons forecast earnings per share and U.S. same-store sales growth to be at the high end or slightly above its target ranges.

Net income attributable to the company for the second quarter was C$123.75 million or C$0.92 per share, compared to C$123.74 million or C$0.81 per share in the year-ago period.

The increase in earnings per share reflects lower number of weighted average shares outstanding in the latest quarter due to the recent recapitalization and resulting expanded share repurchase program.

On average, 13 analysts expected the company to report earnings of C$0.87 per share for the quarter. Analysts' estimates typically exclude one-time items.

Total revenues for the quarter grew 9 percent to C$874.35 million from C$800.14 million in the same period last year. Analysts' revenue consensus for the quarter was C$843.29 million.

Marc Caira, president and CEO of Tim Hortons said, "Our second quarter results reflect strong organizational alignment and execution of our Winning in the New Era strategic plan."

Systemwide sales for the quarter increased 6.5 percent on a constant currency basis, reflecting new restaurant development as well as same-store sales growth in Canada and the U.S.

Distribution sales growth was 9.2 percent, while rents and royalties revenue grew 7.5 percent.

Franchise fee revenue surged 60 percent, due to increased levels of restaurant renovations and development in Canada, which also resulted in a significant increase in associated franchise fee costs.

Canadian same-store sales grew 2.6 percent due to gains in average cheque resulting from favourable product mix and pricing, partially offset by a decline in same-store transactions.

In the U.S., same-store sales grew 5.9 percent, again driven by gains in average cheque resulting from favourable product mix and pricing.

In the U.S., cold beverage sales made a positive contribution due to new product introductions such as Frozen Hot Chocolate and ongoing innovation around the company's Iced Capp platform. Continued growth in the breakfast daypart also contributed to same-store sales growth.

The company said its board has recommended a dividend of C$0.32 per common share, payable on September 3 to shareholders of record as of August 18.

Looking ahead to fiscal 2014, Tim Hortons anticipates fiscal 2014 earnings per share to be at the high end or slightly above its targeted range of $3.17 to $3.27 per share. Street expects the company to earn $3.24 per share for the year.

The company expects same-store sales growth in the U.S. for 2014 to be at the high end or slightly above its targeted range of 2 percent to 4 percent.

THI closed Tuesday's trading at $54.79, down $0.46 or 0.83 percent on a volume of 271,899 shares.