Quick-service restaurant chain Tim Hortons Inc. (THI,THI.TO) on Thursday reported a 73 percent decline in profit for the fourth quarter from last year, when results were boosted by a gain related to the sale of the company's 50 percent joint-venture interest in Maidstone Bakeries.
However, the Canada-based company's adjusted earnings as well as revenues increased from last year on same-store sales growth in both Canada and the U.S. Revenues beat analysts' expectations.
Further, Tim Hortons boosted its quarterly dividend by 23.5 percent and announced a new share repurchase program of up to C$200 million. The company also forecast earnings for fiscal year 2012 in line with analysts' estimates.
A household name in Canada, Tim Hortons has been making inroads in U.S. markets, mainly in the northeast. The company is well-known for its coffee and doughnuts.
Systemwide sales grew by 9.2 percent in the fourth quarter on a constant currency basis. Franchise revenues grew 12 percent to C$231.64 million, reflecting a higher number of restaurant openings, resales and replacements.
Same-store sales grew 5.5 percent in Canada. Same-store sales is a key retail industry performance metric to gauge activity at store locations that have been open for at least a year.
The U.S. segment had the strongest quarter of same-store sales growth since 2006, increasing 7.2 percent on top of a 6.3 percent increase in the year-ago period.
The company's fourth-quarter net income fell to C$102.95 million or C$0.65 per share from C$377.12 million or C$2.19 per share in the prior-year period.
Excluding one-time items, earnings per share rose 25.8 percent from C$0.52 in the year-ago period.
On average, 12 analysts polled by Thomson Reuters expected the company to earn C$0.62 per share. Analysts' estimates typically exclude special items.
Total revenues for the quarter grew 21.2 percent to C$779.79 million from C$643.50 million in the prior-year period and beat analysts' consensus estimate of C$735.69 million.
The company noted that in the year-ago quarter, it allocated C$30 million to its restaurant owners from the proceeds of the sale of the joint-venture interest. This reduced its revenues in the prior-year period.
Looking ahead to fiscal 2012, Tim Hortons forecast earnings per share of C$2.65 to C$2.75. This compares to earnings per share of C$2.35 in fiscal 2011. Analysts expect the company to earn C$2.72 per share for the year.
Tim Hortons said it plans to commence the new share repurchase program on March 5, 2012. The program is due to terminate on March 4, 2013.
Tim Hortons' board of directors has approved a 23.5 percent increase in the quarterly dividend to C$0.21 per common share, which is within its targeted payout range of 30 to 35 percent. The new dividend is payable on March 20 to shareholders of record as of March 5.
In Thursday's session, THI is trading at $52.51, up $1.83 or 3.61 percent on a volume of 99,375 shares.
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