Tim Hortons profit tops estimates as customers spend more

Wed Nov 5, 2014 11:05am EST
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By Solarina Ho

TORONTO (Reuters) - Profit at Canadian coffee and doughnut chain Tim Hortons Inc THI.TO, which is being bought by Burger King Worldwide Inc BKW.N, beat market estimates in the third quarter as customers opted for the more expensive items on the company's menu.

Net income fell about 14 percent, however, mostly due to costs related to U.S. fast-food chain Burger King's C$12.64 billion ($11.06 billion) takeover deal, Tim Hortons said on Wednesday.

On Tuesday, Burger King reported its strongest quarterly growth in North American same-restaurant sales in two years.

"Both Tim Hortons and Burger King have good franchisee-level sales momentum heading into the merger of their businesses," Desjardins analyst Keith Howlett said in a client note.

The transaction, announced in August and expected to close next month or early 2015, would create the world's third-largest fast-food restaurant group.

Tim Hortons shareholders will vote on the deal on Dec. 9. The company's stock rose 1 percent to C$92.74 on Wednesday.

Tims said sales for the three months ended Sept. 28 at stores open at least 13 months rose by 6.8 percent in the United States versus 3 percent a year earlier. In Canada, they rose by 3.5 percent versus 1.7 percent.

Customers in Canada spent more on breakfast and lunch items such as the new spicy crispy chicken sandwich, but traffic fell for the 10th straight quarter.   Continued...

A Tim Hortons coffee cup is seen on the ground outside a shop near Times Square in New York August 26, 2014. REUTERS/Brendan McDermid