Tim Hortons chain looks to expand its restaurants across the globe

TORONTO – First North America, then the world — at least that’s how Tim Hortons Inc. (TSX:THI) hopes to conquer the coffee market.

Chief executive Marc Caira told investors Thursday that he plans to grow the restaurant’s operations outside the company’s home base and the United States, starting first with the Middle East and then moving onto other countries.

“Our focus in the short-term is on continuing to grow and learn in this part of the world (the Middle East) before embarking on further expansions internationally,” he said on the company’s financial results conference call.

“This is not about plastering the Tim Hortons brand everywhere, this is about taking the brand where it makes sense and where we can further build,” he added later.

Caira did not say what other countries Tim Hortons might consider as the next step, but noted that these are “very early thoughts” for a five-year plan.

Under Caira’s leadership, which started in July, the company is reviewing its priorities and ways that it can boost its reputation with both domestic and international coffee drinkers.

Already Tim Hortons can be found in the United Arab Emirates, Oman and Kuwait, which collectively have 33 locations.

Nearly three years ago, Tim Hortons signed licence agreement with the Apparel Group that would install up to 120 multi-format stores to be opened in the United Arab Emirates, Qatar, Bahrain, Kuwait and Oman over five years.

At home, Tim Hortons is facing pressure from competitors like Starbucks and the McDonald’s McCafe line which are luring customers with different choices and a broad range of prices.

In some areas, Tim Hortons has fallen behind. Starbucks reported last month that 11 per cent of its sales in the U.S. and Canada come through technology built into its mobile app. Tim Hortons has an app called “Timmy Me,” but it doesn’t allow customers to pay with it.

“We need to embrace technology to leverage our scale and reach and further enhance the experience of our guests,” Caira said.

“The restaurant industry will continue to operate in this new reality of low growth with competitive intensity,” he added.

Tim Hortons still sells eight out of 10 coffees served by Canadian businesses, and its leadership position remains an advantage in a competitive market, he said.

One of those plans will focus on younger customers who demand more complex coffee drinks and a broader food selection.

“I wouldn’t say we’ve lost touch with the younger consumer … but I think we can do perhaps a bit more to keep them engaged with our brand,” he said.

“We will need to further embrace the trial of healthier options by offering a more of these balanced choices.”

In its financial results, Tim Hortons said third-quarter profits grew, even though the results still fell short of analyst expectations.

It earned $113.9 million, or 75 cents per share, up from $105.7 million a year earlier, or 68 cents a share. On an adjusted basis, earnings were 75 cents per share, two cents shorter than analysts expected, according to a poll by Thomson Reuters.

Tim’s revenue did come in nearly a million dollars ahead of estimates, rising nearly three per cent from a year earlier to $825.3 million, up from $802.0 million a year earlier.

In Canada, same-store sales grew 1.7 per cent as customers spent more per visit, mainly due to an increase in prices. Same-store sales are an important metric for the retail industry that factors in locations open for at least a year.

In the United States, same-store sales increased three per cent on more transactions.

The company spent notably less on corporate reorganization. About $1 million went towards the initiative, compared to $8.6 million a year ago when it booked costs from a change in its chief executive officer and other fees.

In the afternoon, Tim Hortons shares were ahead seven cents at $62.67 on the Toronto Stock Exchange.