Tim Hortons shares down on weak 4Q, forecast

Tim Hortons says tough economy and competition weigh on 4th-quarter performance

Tim Hortons Inc. reported Thursday that its net income for the fourth quarter fell 2.5 percent due to higher interest and restructuring expenses. The Canada-based restaurant chain also said that tough economy continues to weigh on consumers and it issued a disappointing forecast for the full year.

The quick-service restaurant chain earned 100.3 million Canadian dollars ($100.6 million) for the quarter. That's down from 103 million Canadian dollars in the prior year's quarter. Its earnings on a per-share basis stayed flat at 65 Canadian cents (64 cents).

Tim Hortons said 9 million Canadian dollars in restructuring costs during the most recent quarter lowered its earnings by 5 Canadian cents per share, but that was offset by the gain in value per share due to a repurchase program. The company had nearly 3 percent fewer common shares outstanding in the most recent quarter than in the prior year.

Total revenue increased 4 percent to 811.6 million Canadian dollars ($814.1 million), helped by a larger store base. The company said tough economic conditions and competition were a challenge during the quarter. However, a shift in the timing of New Year's Eve and New Year's Day, which tend to be slower sales days, into the first quarter of 2013 benefited the most recent quarter's results.

Revenue from its stores open at least a year increased 2.6 percent in Canada and 3.2 percent in the U.S. This is considered a key measure of financial performance as it strips away the impact of recently opened or closed stores.

The quarter's results fell short of market expectations. Analysts polled by FactSet were expecting the company to earn 71 cents per share on revenue of $831.4 million.

Tim Hortons said that it expects some sales trends to remain weak in 2013, due to economic and competitive pressures. It forecast earnings between 2.87 and 2.97 Canadian dollars per share for the year ($2.88 to $2.98); analysts were forecasting $3 per share. That does not include an estimated 9 million Canadian dollars of reorganization costs expected to be incurred in the first quarter, as well as further unspecified costs during 2013 related to the transition to a new CEO.

The company has yet to hire a long-term CEO following the sudden resignation of its CEO Don Schroeder in 2011. Tim Hortons named Paul House as president and CEO until the end of 2013, unless a new CEO is named before then. House will also stay on as executive chairman.

Tim Hortons is conducting the search while reorganizing the rest of its business. It said Thursday that it expects to have substantially completed realigning roles and responsibilities within its new structure by the end of the first quarter. At the same time, the board said it has made significant progress in its external CEO search and expects to name a new CEO by early summer.

The company also said Thursday that it is increasing its quarterly dividend and expanding stock buybacks.

Tim Hortons is raising its quarterly dividend payment by nearly 24 percent to 26 Canadian cents. The dividend is payable on March 19 to shareholders of record on March 4. For U.S. shareholders, the dividends will be converted and paid in U.S. dollars based on prevailing exchange rates at the time.

The company also said that it will buy back up to 250 million Canadian dollars of its common shares, an increase from the previous program, which was capped at 200 million Canadian dollars.

U.S.-listed shares fell $1.70, or 3.4 percent, to $48.20. Its shares are nearing the bottom of its 52-week trading range of $45.41 to $58.47.