Toronto, May 8 - Tim Hortons is sticking with its Canadian same store sales growth target of 3 percent to 5 percent for 2009 despite the tough economy, and the doughnut retailer's chief executive said Friday that raising coffee prices would be a last resort.
"We have got the marketing programs, the promotional activity and the price points that we think will help us satisfy our goals this year," CEO Donald Schroeder told Reuters.
"What we said at the beginning of the year remains in place unless there was some dramatic change to cause us to say something different."
Tim Hortons released these lofty goals in late February on the same day that it reported same-store sales for the fourth quarter grew by 4.4 percent in Canada, while sales in its stores in the United States retreated by 0.1 percent.
Since then, the company, which reported a 7.5 percent rise in quarterly profit on Thursday, has seen a dramatic shift in the key figure that tracks the performance of stores open for at least a year.
Earlier this week, it said comparable sales for the first quarter ended March 29 rose 3.4 percent in its Canadian stores, compared with 3.5 for the same time last year. It posted 3.2 percent growth in U.S. stores, up from 1 percent.
But BMO Capital Markets analyst David Hartley said the goal was aggressive given expected weak volumes and the continuing tough economic times.
"It could be a stretch," Hartley said.
Schroeder said the company would work with its store owners to cut costs while offering new food offerings before raising the price of a cup of coffee.
"They (store owners) just want their customers to know that at the end of the day if and when they do (raise coffee prices) it will be a last resort and after they've looked at every other option available to them," Schroeder said.
Tim Hortons faced stiff competition in the past month as McDonald's Corp offered free breakfast-time coffee in certain regions of Canada. Analysts said the company would face a small hit as a result of the temporary competition, but Schroeder refused to comment on the financial impact of the promotion.
Shares of his company, which have fallen more than 15 percent so far this year, closed down 1.6 pct at C$28.59 on the Toronto Stock Exchange.
OPENING MORE STORES
The restaurant chain, which has more than 2,900 stores in Canada and 500 in the United States, also plans to open 150 to 180 new locations this year. Of this, 120 to 140 are slated for Canada, and 30 to 40 in the growing U.S. market.
"This is consistent with what we have done over the last few years," he said. "In total it is about the same (as last year)."
However, Schroeder said the number in the United States is down from last year because of the economic downturn.
The weak economy has sapped consumer confidence and prompted a retreat in spending in the United States just when Tim Hortons was mounting an aggressive push into the market.
In February, it shut 11 underperforming stores, mostly in the New England area, and took a charge of 8 Canadian cents a share.
The company, which shifted to a U.S. corporate structure following its mid-1990s purchase by Wendy's , said Thursday it completed plans to reorganize as a Canadian public company to take advantage of a better tax rate.
The timing is contingent on shareholder approval.