Tim’s asking patrons to swallow price hike

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This article was published 24/02/2011 (4411 days ago), so information in it may no longer be current.

THE price of your morning double-double may be headed up this year as the cost of coffee climbs higher, the chief executive of Tim Hortons said Wednesday as the company reported its latest quarterly earnings.

Don Schroeder, president and chief executive of the ubiquitous Canadian coffee-and-doughnut chain, said the rising cost of coffee, which is about twice what it was in June last year, as well as other commodities key to making its doughnuts and other goodies will be passed on to its franchisees.

Tim Hortons raised prices at its U.S. locations by about three per cent last week and Schroeder said the company is meeting with its store owners regarding pricing in Canada.

“While we know they will be cautious and prudent when looking at price increases that affect their guests, we expect that certain regions and markets in Canada will need to take price increases,” Schroeder told a conference call with financial analysts.

The company posted a fourth-quarter profit of $377.1 million, or $2.19 per share, boosted by the sale of its stake in Maidstone Bakeries in the fourth quarter of 2010. The profit compared with a profit of $91 million, or 51 cents per share, in the last three months of 2009.

The company saw a pre-tax gain of $361 million from the sale of its 50 per cent stake in Maidstone, a bakery the company was forced to sell last August after its Swiss partner invoked a contract provision forcing Tim Hortons to either buy or sell.

Sales slipped to $437 million from $464.6 million a year ago, partly due to an extra week in the fourth quarter of 2009 for accounting purposes. Overall revenue, which also includes revenue from Tim Hortons franchise operations, declined 3.5 per cent to $643.5 million.

Same-store sales, sales at locations open at least a year, were up 3.9 per cent in Canada and 6.3 per cent in the United States.

In 2009, Tim Hortons and its franchisees absorbed some of effect of rising commodity prices to hold the line on prices amid the recession.

“But that was a very rare situation,” chief financial officer Cynthia Devine said. “Times have changed. There are significant commodity price increases that we need to pass on.”

— The Canadian Press