Tim Hortons second-quarter profit edges ahead as revenue up nine per cent

Tim Hortons Inc. (TSX:THI) said Thursday an uptick in sales in both Canada and the U.S. led to a modest increase in profits during the second quarter.

OAKVILLE, Ont. — Tim Hortons Inc. (TSX:THI) said Thursday an uptick in sales in both Canada and the U.S. led to a modest increase in profits during the second quarter.

The coffee store chain reported net earnings of $77.8 million or 43 cents per share for the quarter ended June 28, up from year-earlier net income of $75 million or 41 cents per share.

Quarterly revenue climbed nine per cent to $556.1 million from $510.7 million recorded the year before, with an increase in sales contributing to the improvement in top line performance.

The popular purveyor of double-doubles, which has come to dominate the Canadian coffee market, reported a 3.3 per cent increase in same-store sales in the United States, a market it has struggled to conquer. Same-store sales refers to sales at locations that have been open for at least a year.

Growth was more modest in Canada at 1.7 per cent, as the company faced a variety of challenges including the economy and heightened promotional campaigns from coffee competitors like McDonalds and Starbucks.

Tim Hortons said system-wide sales increased five per cent.

“We overcame anticipated challenges in the second quarter and delivered positive sales and earnings growth, demonstrating the strength and resilience of our business,” chief executive Don Schroeder said in a statement.

“We were particularly pleased with growth in transactions in our Canadian business and the operational and earnings improvement in our U.S. business.”

CIBC analyst Perry Caicco said in a note that overall results were close to expectations, with revenue coming in higher than expected.

The earnings were “a bit soft on Canadian sales, but U.S. was reasonable,” he wrote.

In its outlook, Tim Hortons said it expects to meet its same-store sales growth of three to five per cent for the year in Canada, and may exceed its target of zero per cent to two per cent in the United States.

Overall, it expects operating income growth of six to eight per cent for the year, when factoring in asset impairment charges and other restaurant closure costs for the fourth quarter.

Shares in Tim Hortons gained 85 cents or 2.8 per cent to $30.75 in morning trading on the Toronto Stock Exchange.

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