Coffee chain Tim Hortons is well positioned to survive the tough times as world markets tumble and consumers fret that another recession could be coming, the company's chief executive said Thursday.
CEO Paul House said the company has seen no change in spending patterns since a tumble on world stock markets in recent weeks sparked by the debt crisis in Europe and the downgrade of the United States' credit rating.
"I think our business has historically done fairly well through tough times and we continue to see it that way," House told analysts Thursday on a conference call, the same day Tim's reported a slightly higher second-quarter profit of $95.5 million.
"Things like high gasoline and energy costs and so forth that hit the consumer for a share of their wallet is concerning, but having said that, great loyalty seems to hold the day for us."
A decrease in disposable income could hurt transaction volumes at Tims a little, as some twice-daily customers could reduce their java trip to once daily, House conceded.
Tim Hortons, like other coffee and restaurant chains, has been grappling with the climbing price of commodities like coffee and the wheat and sugar used in its baked goods. But House said the company is locked into lower prices from its suppliers until at least early into next year.
"Commodities are still obviously very uncertain as we look forward later into 2012, they're quite volatile, we're not sure where they're going to end up at," House said, explaining that the company does not think it will have to put forward another price increase. The company raised its menu prices about 4.5 per cent in April to cover rising costs.
"I'd say we got through that price increase with very little negative feedback," House said.
The only regions likely to see a price hike for the rest of the year are Alberta and other areas that have not yet been subjected to higher prices.
The price of coffee, like other commodities, rises and falls. The cost for September delivery closed at $2.40 a pound on Thursday. That's lower than the $2.65 per pound in April, but up sharply from $1.39 per pound in March last year.
The price keeps climbing because major coffee grower Colombia has been hit by a fungus that destroys coffee plants and more people in growing economies like China and India are willing to spend their money on a java jolt, which has led to dwindling world coffee stockpiles.
House made the comments on the same day Tim Hortons (TSX:THI) reported a second-quarter profit of $95.5 million, up slightly from $94.1 million the same time last year as revenues jumped nearly 10 per cent.
That amounted to net earnings of 58 cents per share, compared with 54 cents per share in the same period a year earlier.
Excluding a three cent per share charge related to settlement payments made to former CEO Don Schroeder, the company earned 61 per cent share, in line with analyst estimates.
Canadian same-store sales were up 3.8 per cent, while U.S. same-store sales rose 6.6 per cent.
House said the company plans to "vigorously defend" its position as the coffee market leader in Canada as competition from quick service restaurants like McDonalds heats up as they try to capture a bigger share of the breakfast and snack markets.
Just south of the border, however, Tims competitive situation is very different as it tries to claw its way into that hyper-competitive market.
Late last year, Tim Hortons said it would close 54 locations in New England, a money-losing market for the company, where it faces strong competition from locally-headquartered Dunkin Donuts.
Its strategy is to build up stores in core markets ? border states like Michigan and New York ? rather than expand to new regions, House said.
House recently took over the CEO role on an interim basis after former head Don Schroeder stepped down in an abrupt departure in May. The company is in the midst of a search for a new permanent chief executive and has already compiled a list of internal candidates but has yet to identify all potential external candidates.
Since opening its first U.S. store in Buffalo, N.Y., in 1985, Tim Hortons has expanded to over 600 stores in a dozen states ? including Michigan, Ohio, Kentucky and West Virginia ? and plans to open another 300 locations over the next three years.
Based in Oakville, Ont., Tim Hortons (TSX:THI) is Canada's biggest restaurant chain and the fourth-biggest in North America with more than 3,700 restaurants on the continent.
The company has recently been changing its approach in some markets, including a licence agreement with Dubai-based Apparel Group to open up to 120 restaurants in the United Arab Emirates, Qatar, Bahrain, Kuwait and Oman over the next five years.
Shares in the company gained 4.8 per cent or $2.10 to close at $45.71 Thursday on the Toronto Stock Exchange.
CEO Paul House said the company has seen no change in spending patterns since a tumble on world stock markets in recent weeks sparked by the debt crisis in Europe and the downgrade of the United States' credit rating.
"I think our business has historically done fairly well through tough times and we continue to see it that way," House told analysts Thursday on a conference call, the same day Tim's reported a slightly higher second-quarter profit of $95.5 million.
"Things like high gasoline and energy costs and so forth that hit the consumer for a share of their wallet is concerning, but having said that, great loyalty seems to hold the day for us."
A decrease in disposable income could hurt transaction volumes at Tims a little, as some twice-daily customers could reduce their java trip to once daily, House conceded.
Tim Hortons, like other coffee and restaurant chains, has been grappling with the climbing price of commodities like coffee and the wheat and sugar used in its baked goods. But House said the company is locked into lower prices from its suppliers until at least early into next year.
"Commodities are still obviously very uncertain as we look forward later into 2012, they're quite volatile, we're not sure where they're going to end up at," House said, explaining that the company does not think it will have to put forward another price increase. The company raised its menu prices about 4.5 per cent in April to cover rising costs.
"I'd say we got through that price increase with very little negative feedback," House said.
The only regions likely to see a price hike for the rest of the year are Alberta and other areas that have not yet been subjected to higher prices.
The price of coffee, like other commodities, rises and falls. The cost for September delivery closed at $2.40 a pound on Thursday. That's lower than the $2.65 per pound in April, but up sharply from $1.39 per pound in March last year.
The price keeps climbing because major coffee grower Colombia has been hit by a fungus that destroys coffee plants and more people in growing economies like China and India are willing to spend their money on a java jolt, which has led to dwindling world coffee stockpiles.
House made the comments on the same day Tim Hortons (TSX:THI) reported a second-quarter profit of $95.5 million, up slightly from $94.1 million the same time last year as revenues jumped nearly 10 per cent.
That amounted to net earnings of 58 cents per share, compared with 54 cents per share in the same period a year earlier.
Excluding a three cent per share charge related to settlement payments made to former CEO Don Schroeder, the company earned 61 per cent share, in line with analyst estimates.
Canadian same-store sales were up 3.8 per cent, while U.S. same-store sales rose 6.6 per cent.
House said the company plans to "vigorously defend" its position as the coffee market leader in Canada as competition from quick service restaurants like McDonalds heats up as they try to capture a bigger share of the breakfast and snack markets.
Just south of the border, however, Tims competitive situation is very different as it tries to claw its way into that hyper-competitive market.
Late last year, Tim Hortons said it would close 54 locations in New England, a money-losing market for the company, where it faces strong competition from locally-headquartered Dunkin Donuts.
Its strategy is to build up stores in core markets ? border states like Michigan and New York ? rather than expand to new regions, House said.
House recently took over the CEO role on an interim basis after former head Don Schroeder stepped down in an abrupt departure in May. The company is in the midst of a search for a new permanent chief executive and has already compiled a list of internal candidates but has yet to identify all potential external candidates.
Since opening its first U.S. store in Buffalo, N.Y., in 1985, Tim Hortons has expanded to over 600 stores in a dozen states ? including Michigan, Ohio, Kentucky and West Virginia ? and plans to open another 300 locations over the next three years.
Based in Oakville, Ont., Tim Hortons (TSX:THI) is Canada's biggest restaurant chain and the fourth-biggest in North America with more than 3,700 restaurants on the continent.
The company has recently been changing its approach in some markets, including a licence agreement with Dubai-based Apparel Group to open up to 120 restaurants in the United Arab Emirates, Qatar, Bahrain, Kuwait and Oman over the next five years.
Shares in the company gained 4.8 per cent or $2.10 to close at $45.71 Thursday on the Toronto Stock Exchange.
