UPDATE 3-Tim Hortons profit misses forecast; shares up after dividend hike

Thu Feb 20, 2014 2:48pm EST
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By Solarina Ho

TORONTO Feb 20 (Reuters) - 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 offerings.

"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.   Continued...