Tim Hortons not seeking U.S. doughnut chain
Tim Hortons Inc. is not seeking to acquire a U.S. doughnut chain as part of its efforts to expand south of the border, but wouldn’t rule it out “if it was attractive to acquire,” CEO Paul House told shareholders at the retailer’s first annual meeting Friday.
House said the company is looking first to become an established, well-known chain in one region, namely New York state, Michigan, Ohio and Maine, before it expands.
“Not that we wouldn’t look at something if it was attractive to acquire, but that is not part of our strategy,” House said in response to a shareholder who suggested there are strong chains in the U.S. that “may be ripe to be taken over.”
But House replied that has never been part of Tim Hortons’ strategy and noted the chain built up to more than 3,000 stores in Canada without a single acquisition.
“We want to be a strong regional player in the United States and we want to achieve that goal, and when we’ve met that goal we’ll broaden our horizons,” House said.
“There are difficulties, but they are opportunities, and we see them as great opportunities. That is one of the reasons we’re concentrating on certain markets and not getting ambitious about a national chain or any of that.”
The company’s growth in the U.S. has been weaker than in Canada.
The firm posted earnings Thursday of $59.3 million for the first quarter, down from $63.6 million a year ago.
Sales at stores that have been open more than one year increased 6.3 per cent in Canada – above the company’s long-term expectations – and four per cent in the U.S.
Tim Hortons’ profits amounted to 31 cents a share and compared with 39 cents per share last year, due in part to a higher tax rate and a 17.8 per cent higher share count was as a result of the company’s initial public offering in March 2006.
Total revenues were $424.6 million for the three months ended April 1, up 13.9 per cent from $372.8 million in the first quarter of 2006. Overall sales growth, which includes both franchised and company-operated restaurants, was 10.4 per cent.
The effective tax rate in the first quarter was 34.6 per cent, compared with 14.8 per cent in 2006.
Analyst Irene Nattel, with RBC Capital Markets, said the company is “firing on five cylinders,” referring to the U.S. results which she said did not live up to expectations.
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