May 25, 2011 / 12:39 PM / in 6 years

Tim Hortons CEO exits abruptly, shares drop

TORONTO (Reuters) - Tim Hortons Inc, Canada’s largest restaurant chain, announced on Wednesday the abrupt departure of its chief executive as it executes an aggressive expansion drive in the United States.

<p>Tim Hortons Inc. President and CEO Donald Schroeder speaks during the annual general meeting of shareholders in Toronto May 13, 2011. REUTERS/ Mike Cassese</p>

Chief Executive Donald Schroeder, a 20-year veteran of the coffee-and-doughnut chain, was named president and CEO in 2008.

The company, whose shares dropped about 1 percent after the announcement, did not say in its press release why Schroeder was leaving or if there was any dissatisfaction with his performance. It did not immediately return calls seeking further comment.

Tim Hortons, one of Canada’s most familiar brand names, has invested heavily in advertising and marketing in the United States, aiming to replicate the success it has enjoyed in its home country. It plans to open 300 more restaurants in the United States by 2013.

In its latest quarter, however, it stumbled in Canada. Earlier this month, it reported a first-quarter profit below estimates as it spent heavily on its “Roll Up the Rim” promotion. In addition, sales at Canadian stores open at least a year slowed to a 2 percent increase from 5.2 percent a year earlier, a drop the company blamed on severe winter weather.

“The CEO’s exit is a function of the challenges in execution of its strategic plan,” Raymond James analyst Kenric Tyghe said.

The company has more than 3,000 restaurants in Canada and more than 600 in the United States, where it focuses on nine states, including New York, Michigan and Pennsylvania.

South of the border, it competes with McDonald’s Corp, Dunkin’ Donuts and Starbucks.

Tim Hortons said Paul House, currently executive chairman and a former CEO, would serve as interim CEO. The company did not spell out the timing for completing the process of replacing Schroeder.

“The board has made the determination that the current timing under all circumstances is best-suited to transition CEO leadership,” Frank Iacobucci, the lead director, said in a statement.

The board will conduct an internal and external search to fill the vacancy, the company said.

Shares of the company were down 18 Canadian cents at C$45.65 early on Wednesday afternoon on the Toronto Stock Exchange. They fell about 1 percent to $46.69 on the New York Stock Exchange.

Reporting by Bhaswati Mukhopadhyay in Bangalore; Editing by Sriraj Kalluvila, Roshni Menon and Peter Galloway

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