Tim Hortons began serving coffee, doughnuts, and soup to New Yorkers on Monday. New Yorkers being what they are, most of them probably didn't notice and those that did likely wondered what the heck is Tim Hortons anyway?
Unless they were expat Canadians, very few of the people who tried the free coffee and Timbits would have known that the Tim Hortons name is as iconic in Canada as McDonald's or Starbucks is in the U.S. It's unlikely to ever gain the same status south of the border but the audacious move to woo the Big Apple is a big step in that direction.
The company opened nine locations in Manhattan on Monday including four in such high-traffic areas as Broadway, Madison Square Garden, Penn Station, and Times Square. Two others opened in Brooklyn and another Manhattan outlet will be in business soon.
The New York City invasion marks Tim Hortons biggest initiative yet in the U.S. The company already has about 500 locations in the States (compared to almost 3,000 in Canada) but many are in smaller communities. Tim Hortons restaurants sell about two billion cups of coffee annually and account for more than seven of every 10 cups of coffee sold in quick service restaurants in this country.
As most Canadians know, the company was founded in 1964 by NHL hall-of-famer Tim Horton, who played for the Toronto Maple Leafs, New York Rangers, and Buffalo Sabres until his death in 1974. The chain operated exclusively in Canada for 20 years, then opened its first U.S. store in Tonawanda, NY (near Buffalo) in 1984. Its coffee bean roasting plant is based in Rochester, NY.
Only old-timers remember that the original stores offered only two products: coffee and doughnuts. But as the years passed, a variety of new items appeared ranging from apple fritters to freshly baked pies. In the 1980s, the company took the big step of tackling the lunch market with such products as chili, soup, bagels, sandwiches, and wraps. This expanded the appeal of the stores and increased revenue dramatically.
In 1995, Tim Hortons was taken over by Wendy's International and a great Canadian name passed into Yankee hands. However, just over a decade later, it was spun off as a separate company on Sept. 29/06. The shares now trade on the New York and Toronto stock exchanges under the symbol THI. The head office remained in Dublin, Ohio but the company recently filed an application with U.S. securities regulators to return to Canada.
I am recommending the purchase of Tim Hortons stock at this time because I believe it offers a timely combination of defensiveness and growth potential. The company's core Canadian operation is recession-resistant and revenue and profits have improved despite the economic slowdown. The U.S. expansion is risky but if it is successful it offers the potential for significant capital gains down the road.
First-quarter results (to March 29) showed a 10.1% increase in earnings per share to 37c from 33c in the same period a year ago. (The company reports in Canadian dollars despite being headquartered in the U.S.) Revenue rose 10.2% to $507.2 million. Same-store sales in Canada were up 3.4% while in the U.S. they gained 3.2%. The U.S. increase was a bonus as analysts had expected sales there to decline because of the intensity of the recession.
As far as risks are concerned, the New York venture could fall flat, which would mark a major set-back to the company's plans to grow the business in the U.S. There is also some strong competition from McDonald's which temporarily cut into Tim Hortons market share with a free coffee promotion in April. However, there is no indication the impact extended beyond the giveaway period.
The shares pay a quarterly dividend of 10c to yield 1.5%.
To sum up, Tim Hortons shares are recommended for investors seeking a defensive stock for their portfolio. The dividend and capital gains potential are an attractive bonus. The stock closed on Friday at C$28.88, US$25.91.
Action now: Buy. - G.P.
Unless they were expat Canadians, very few of the people who tried the free coffee and Timbits would have known that the Tim Hortons name is as iconic in Canada as McDonald's or Starbucks is in the U.S. It's unlikely to ever gain the same status south of the border but the audacious move to woo the Big Apple is a big step in that direction.
The company opened nine locations in Manhattan on Monday including four in such high-traffic areas as Broadway, Madison Square Garden, Penn Station, and Times Square. Two others opened in Brooklyn and another Manhattan outlet will be in business soon.
The New York City invasion marks Tim Hortons biggest initiative yet in the U.S. The company already has about 500 locations in the States (compared to almost 3,000 in Canada) but many are in smaller communities. Tim Hortons restaurants sell about two billion cups of coffee annually and account for more than seven of every 10 cups of coffee sold in quick service restaurants in this country.
As most Canadians know, the company was founded in 1964 by NHL hall-of-famer Tim Horton, who played for the Toronto Maple Leafs, New York Rangers, and Buffalo Sabres until his death in 1974. The chain operated exclusively in Canada for 20 years, then opened its first U.S. store in Tonawanda, NY (near Buffalo) in 1984. Its coffee bean roasting plant is based in Rochester, NY.
Only old-timers remember that the original stores offered only two products: coffee and doughnuts. But as the years passed, a variety of new items appeared ranging from apple fritters to freshly baked pies. In the 1980s, the company took the big step of tackling the lunch market with such products as chili, soup, bagels, sandwiches, and wraps. This expanded the appeal of the stores and increased revenue dramatically.
In 1995, Tim Hortons was taken over by Wendy's International and a great Canadian name passed into Yankee hands. However, just over a decade later, it was spun off as a separate company on Sept. 29/06. The shares now trade on the New York and Toronto stock exchanges under the symbol THI. The head office remained in Dublin, Ohio but the company recently filed an application with U.S. securities regulators to return to Canada.
I am recommending the purchase of Tim Hortons stock at this time because I believe it offers a timely combination of defensiveness and growth potential. The company's core Canadian operation is recession-resistant and revenue and profits have improved despite the economic slowdown. The U.S. expansion is risky but if it is successful it offers the potential for significant capital gains down the road.
First-quarter results (to March 29) showed a 10.1% increase in earnings per share to 37c from 33c in the same period a year ago. (The company reports in Canadian dollars despite being headquartered in the U.S.) Revenue rose 10.2% to $507.2 million. Same-store sales in Canada were up 3.4% while in the U.S. they gained 3.2%. The U.S. increase was a bonus as analysts had expected sales there to decline because of the intensity of the recession.
As far as risks are concerned, the New York venture could fall flat, which would mark a major set-back to the company's plans to grow the business in the U.S. There is also some strong competition from McDonald's which temporarily cut into Tim Hortons market share with a free coffee promotion in April. However, there is no indication the impact extended beyond the giveaway period.
The shares pay a quarterly dividend of 10c to yield 1.5%.
To sum up, Tim Hortons shares are recommended for investors seeking a defensive stock for their portfolio. The dividend and capital gains potential are an attractive bonus. The stock closed on Friday at C$28.88, US$25.91.
Action now: Buy. - G.P.
