The third quarter at Tim Hortons Inc. was “one of the best quarters in recent memory,” said Marc Caira, president and chief executive officer of the North American restaurant chain. The proclamation came despite a 14% decline in net income in the quarter.
Net income in the third quarter ended Sept. 28 was C$98,131,000 ($86,101,000), equal to C$0.74 per share on the common stock, down from C$113,863,000, or C$0.76 per share, in the same quarter a year ago. But sales were strong in the quarter, climbing 10% to C$909,155,000 ($797,676,000).
Caira’s positive spin on Tim Hortons’ financials reflected what he called “good momentum in our business.”
“Effective execution against our strategic priorities has been the key to our success in the third quarter,” he said during a Nov. 5 conference call with industry analysts. “Roughly eight months ago we unveiled our new strategic plan titled ‘Winning in the New Era.’ That is not a lot of time in the context of a five-year plan. It’s also important to remember that we said 2014 was a foundational year to establish longer term building blocks, but even at this early stage I am very pleased with our team’s focus and execution on building a strong base to support our existing and future growth. I believe we are seeing the early rewards of the hard work in the past months.”
After turning in U.S. same-store sales growth of 5.9% in the second quarter — the company’s highest quarterly growth since early 2012 — Tim Hortons performed even better in the third quarter, as U.S. same-store sales grew 6.8%, Mr. Caira said. He said results have been driven by an active marketing calendar and new product launches.
Innovation has extended beyond just the United States, though. Through October, Tim Hortons has increased its number of new product launches in its U.S. and Canadian markets by 80% compared to 2013.
“In the third quarter we extended the popular crispy chicken category with the spicy version,” he said. “We introduced steak and egg breakfast sandwiches and brought back last year’s steak and cheese panini as a permanent item. Our steak products are now made with 100% Canadian beef in Canada and 100% Angus beef in the U.S., features that are important to our guests.
“The highest profile introduction in the quarter was our dark roast coffee, which launched chain wide in both Canada and the U.S. in September following successful pilots. This is a crucial part of our long-term coffee leadership strategy. This product is still new, but we are encouraged by the early results. Our research suggests that a meaningful number of guests intend to order dark roast exclusively, and a larger percentage plans to order it at least occasionally. Another important finding is that many of our guests plan to visit our restaurants more frequently as a result of dark roast. Previously, if they wanted a darker brand they had to visit a competitor.”