In the midst of its immensely popular annual Roll up the Rim contest, Tim Hortons outlined a series of changes in its year-end financial results Thursday. In efforts to boost its stock dividend by 23 percent, the company announced that it would be removing the Cold Stone Creamery brand from its Canadian outlets.
Marc Caira, CEO of Tim Hortons, confirmed that the modifications are an attempt to improve the customer experience by making the service faster, which the Oakville, Ontario-based coffee giant believes will improve its profits. By pulling the plug on serving ice cream, many Tim Hortons locations can now add express beverage lines.
Tim Hortons will be removing about a dozen other items from its menu, such as Gingerbread Man cookies, raisin nut muffins and various doughnuts, including blueberry fritters and walnut crunch. With fewer menu items, the Canadian coffee retailer believes it can offer new and limited-time options.
One initiative that Tim Hortons is banking on is a co-branded Visa card that will give customers instant loyalty rewards to CIBC clients. The launch date is scheduled for sometime in May. Tim Hortons is one of the few coffee outlets in the country that does not maintain a loyalty rewards program.
“At Tim Hortons we’re fortunate to have very loyal guests, many of whom visit us every day. We feel that an innovative card such as this not only provides our guests added convenience, but is a great loyalty rewards solution offering instant redemption for their favourite Tim Hortons menu items," stated David Clanachan, COO of Tim Hortons, in a news release. "This new card complements our strategy to actively pursue further technological innovation that [helps] directly connect our guests with our brand."
Single-serve Tim Hortons Keurig K-Cups and Tassimo T-discs will be expanded into grocery stores this year.
Additional details regarding its five-year strategy will be announced at an online investor conference next week. It is expected that Tim Hortons will list a number of measures to combat the growing competition that McDonald’s and other fast-food chains have been giving consumers. A large number of restaurants have been expanding their coffee beverage selections and have improved the interior decor to entice customers to patronize on a regular basis.
"We will continue to act decisively and make tough decisions where necessary to position our company for profitable growth," Caira said in a quarterly conference call with analysts.
Tim Hortons will be spending up to $440 million buying back its shares. The multi-national corporation projected that its quarterly dividend will increase from 26 to 32 cents per share, to be paid Mar. 18, which would generate a profit of 2.2 percent.
In the fourth quarter of 2013, the company produced earnings of $100.6 million, up from the same time a year ago. Although it produced 69 cents a share, it was still slightly down from analysts’ expectations of 77 cents. Tim Hortons blamed the decline on shutting down several of its underperforming restaurants in the United States, a market that the company continues to struggle in.
Revenues did rise more than 10 percent to $898.5 million. This is the result of charging higher fees on its franchises in order to pay for renovations. Canadian same-store sales, meanwhile, grew 1.6 percent.
Caira noted that Tim Hortons remains operating in an intense, competitive market that includes cheaper alternatives and expanded coffee beverages on Starbucks and Second Cup menus.
“I don’t see the climate changing," he said in his remarks. "There is very little to no growth in this industry. We happen to be the biggest player in this industry."
Roll Up the Rim
Until Apr. 25, Tim Hortons will be running its Roll Up the Rim contest. Customers can simply roll up the rim of their coffee cup to see if they have won a free coffee, doughnut or muffin, a $5,000 prepaid Visa card, a $100 Tim Hortons card or a new car.
This year, however, customers have a second chance of winning as it has introduced an additional roll on the same cup that allows coffee drinkers the chance to win one of 10 more new cars, according to the Globe and Mail. There’s also an online contest called Roll Up the Rim Roulette.
Customers have a one in six change of winning.
"Roll Up the Rim to Win is our big way of saying thank you to our loyal guests. It’s a celebration, and we’re offering a new fun way to keep friends, family and colleagues happy," said Mike Meilleur, Tim Hortons U.S. executive vice president, in a statement.
Tim Hortons has 4,485 locations around the world, including 3,588 in the Great White North. It plans to establish between 215 and 255 new locations this year, with 140 to 160 of those in Canada.
It celebrates its 50 anniversary this year.