TORONTO (Reuters) - Tim Hortons Inc, Canada’s biggest restaurant chain, posted strong quarterly sales growth in stores opened at least a year, especially in the U.S. market, helping lift its shares on Wednesday.
The sales performance, boosted by promotions and menu additions, may have helped investors look past a quarterly profit that was little changed from a year earlier and came up short of analysts’ average forecast.
The company issued a full-year forecast that was in line with market expectations.
Sales at stores open for more than a year, or same-store sales, a key measure for retailers, grew 3.9 percent in Canada and were up 6.3 percent in the United States.
Tim Hortons, the fourth-largest publicly traded restaurant chain in North America, dominates the Canadian landscape, but is less familiar in the United States, where it is overshadowed by the likes of McDonald’s Corp and Dunkin’ Donuts.
“They came up with a very strong same-store sales performance, which is notable,” Canaccord Genuity analyst Candice Williams said.
Edward Jones analyst Brian Yarbrough said the U.S. figure was “a real surprise.”
“They are doing a better job with their menu innovation and they’re doing a better job of being promotional,” Yarbrough said. “That’s driving the traffic into their stores.”
The company said it plans to spend additional advertising dollars to create better brand awareness in the United States.
Even so, Tim Hortons is stepping up the pace of expansion in Canada and is moving more cautiously in the United States, where it recently closed about 36 restaurants.
This year it aims to open 160 to 180 restaurants in Canada, compared with 149 in 2010. It plans new restaurants in 70 to 90 U.S. locations, compared with 96 last year.
Tim Hortons, which specializes in coffee, baked goods and home-style lunches, had 3,750 restaurants at the end of the quarter: 3,148 in Canada and 602 south of the border.
In the United States, the launch of macaroni and cheese, apple baked goods and the cheese bagel breakfast sandwich drew customers to its cafes. So did holiday promotions.
In Canada, the launch of breakfast wraps and slow-cooked oatmeal helped.
The company is also grappling with the rise of coffee prices. It plans to pass on the higher commodity costs to the franchisees, Chief Executive Don Schroeder said on a conference call with analysts.
The price increase is “a necessary evil,” Chief Financial Officer Cynthia Devine said on the call.
Coffee prices have hit their highest level in more than 30 years and are expected to rise further as supplies of high quality beans struggle to keep pace with demand.
Earnings for the fourth quarter, ended January 2, rose to C$377.1 million ($380.9 million), or C$2.19 a share, from C$91 million, or 51 Canadian cents. The company gained C$361.1 million from the sale of its Maidstone bakery business, built to supply franchises with baked goods.
Excluding items, Tim Hortons earned 51 Canadian cents a share, missing market estimates of 55 Canadian cents a share.
Revenue fell 3.5 percent to C$643.5 million.
The sale of Maidstone to European joint venture partner Aryzta AG closed in the fourth quarter.
For 2011, the company sees same-store sales rising by 3 percent to 5 percent in Canada and the United States -- similar to 2010 growth.
The company gave a full-year earnings forecast of C$2.30 to C$2.40 a share. Analysts on average were looking for C$2.36 a share.
“It’s a respectable outlook. It shows healthy growth,” Williams said.
The company -- whose rivals include Starbucks Corp and Second Cup -- increased its quarterly dividend by 31 percent to 17 Canadian cents a share and said it plans to buy back up to C$445 million common shares.
Tim Hortons shares closed up 0.8 percent at C$41.77 on the Toronto Stock Exchange after rising as much as 2.9 percent during the session. The stock has advanced by a third in the last 52 weeks.