ONTARIO Tim Hortons Inc. said Friday that poor sales and store closures within its U.S. division led to an 8.6-percent drop in fourth-quarter profit for the Canadian coffee and doughnut franchisor.
The company, which operates or franchises 3,437 units throughout North America, said same-store sales at its 520-unit U.S. segment declined 0.1 percent for the quarter. Increased menu pricing accounted for about 3.2 percent, indicating that guest traffic was down. Same-store sales in Canada increased 4.4 percent.
“A rapid deterioration of the macroeconomic climate and consumer confidence in the U.S. contributed to another challenging quarter in terms of the sales environment for our U.S. business, where the Tim Hortons brand is not as developed,” the company’s statement said. “Proactive changes in menu promotional activities made during the quarter, including offering product combos and bundles with attractive price points, helped offset the impact of a challenging environment.”
Tim Hortons closed some locations in New England, as it first announced late last year, and recorded $21.3 million in asset impairment charges for the fourth quarter, which led to the U.S. segment’s operating loss of the same amount. For the year, the U.S. division had an operating loss of $26.5 million.
Future development in the United States will be what Tim Hortons called prudent, and will focus on established markets and non-standard units, like self-serve locations and the recently announced co-branding test with Cold Stone Creamery.
For the quarter ended Dec. 28, Tim Hortons’ corporate net income decreased to $54.8 million, from approximately $60.3 million in the same quarter a year earlier. Total revenues for the latest fourth quarter rose 9.4 percent to $446.9 million.
For the full year, Tim Hortons' earnings rose 5.6 percent to $227.9 million on revenues that rose 7.8 percent to $1.62 billion.
The company confirmed plans to buy back $200 million in stock beginning in the current first quarter. It also increased its dividend by 11 percent.