Tim Hortons Inc. has announced results for the first quarter ended April 1, including a 9.4 percent jump in systemwide sales.
"We continue to execute our 'More than a Great Brand' growth strategy and focus our efforts in a disciplined manner. By responding to our guests' needs, we have continued to build momentum, as positively reflected in our strong first quarter results," said Paul House, executive chairman, president and CEO.
Tim Hortons also increased total revenues by 12.1 percent to $721.3 million compared to $643.5 million last year. Rents and royalty growth was 7.4 percent, driven by higher same-store sales and sales from the year-over-year net addition of 211 new full-serve restaurants in Canada and the U.S.
Operating expenses were up 7.3 percent in the first quarter compared to last year as Tim Hortons continued to grow.
First quarter operating income was $131.6 million, increasing 9.1 percent compared to $120.6 million last year. Net income attributable to Tim Hortons Inc. was $88.8 million, rising 10 percent compared to $80.7 million in the first quarter last year. Higher operating income and a lower effective tax rate contributed most to the increase, partially offset by higher net interest expense.
Same-store sales grew 5.2 percent in the first quarter in the Canadian segment. All same-store sales growth came from an increase in average check, which resulted from both favorable product mix and pricing. Recent menu innovation and a solid promotional calendar contributed to strong Canadian same-store sales growth, and the company believes the mild, warm weather across several regions also contributed to strong results.
Recent menu items that supported Tim Hortons’ growth included espresso-based lattes, real fruit smoothies and beef lasagna casserole. The new hot beverage cup sizing in Canada, including the introduction of the 24-ounce cup size, also proved popular with guests.
The company continues to focus on reinforcing value through new and existing product offerings to help offset the potential impact on frequency caused by continued high unemployment and high gasoline pricing. Additionally, it is working to build incremental capacity, which should benefit peak dayparts by enhancing speed of service for guests.
During the quarter Tim Hortons opened 22 restaurants in Canada.
The U.S. segment had robust same-store sales growth of 8.5 percent. This performance was driven in part by average check gains stemming from a combination of pricing and favorable product mix. Continued transaction growth was also a significant contributor to the same-store sales performance. Product mix changes benefited from recent menu innovation in the U.S. market, including contributions from Panini sandwiches. Transaction growth during the first quarter of 2012 was supported by these new products, and by ongoing marketing and promotional efforts, which were designed to increase brand awareness and guest traffic. The company also believes favorable weather contributed to the sales performance of its U.S. segment.
Tim Hortons’ U.S. strategy of allocating the majority of restaurant development capital to core growth markets, heightened advertising and promotional spending, and brand positioning efforts to increase awareness and identity, have all contributed to the progression in the U.S. market throughout the past few years.
The company opened seven restaurants in the U.S. in the first quarter of which six were full-serve standard and non-standard restaurants.
On May 24, Paul House assumed the role of president and CEO of Tim Hortons, in addition to his role as the board's executive chairman, pending the successful completion of a comprehensive CEO succession and global search process. The board of directors has announced that House has committed to continue his current appointment as president and CEO until December, 2013, and the appointment and transition to a successor CEO. House also will continue in his role as executive chairman.
"I am fully committed to a successful leadership transition, and until that time, my energy is focused on building on our momentum. We have an outstanding team, a clear strategic plan and exciting growth initiatives that we will continue to execute," House said.
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