Tim Hortons food prices to rise: analyst
Your morning cup of coffee may not be affected, but Tim Hortons Inc. is expected to increase prices on a number of other items in August.
Credit Suisse analyst David Hartley said distribution channel checks indicate price hikes in the 10¢ to 20¢ range for sandwiches and other items at the popular restaurant chain. He does not think Tim Hortons coffee products will be affected.
Hartley also noted that select stores are going to be selling new small, square sandwich products, while the panini sandwich test in Canada appears to be a success, with a roll out expected across the Tim Hortons chain.
“We expect the new products could carry a higher margin (as percentage of sales), but could prove to be cannibalistic to higher-priced products — not so good for royalties,” Hartley said in a report.
However, he noted the price increases appear to be potentially positive for royalty growth. Tim Hortons reports second-quarter results on Aug. 9.
Hartley is forecasting earnings per share of 68¢, versus consensus of 70¢ and 61¢ in the second quarter of 2011.
Among the key topics he will be looking at are volume trends in Canada — is weakness related to more than just the economy?
The analyst is also curious about a potential K-cup rollout and whether it will be more cannibalistic than its worth, the company’s search for a CEO, and the impact of recent increases in commodity prices.
Hartley forecasts same-store sales growth of 5% in Canada and 5.5% in the United States, but warned of downside risk to these projections in Canada if weaker volume trends persist.