Growth continues to turn from good to better for Tim Hortons' (NYSE:THI.DL) competitors Starbucks (NASDAQ:SBUX), Dunkin' Brands Group (NASDAQ:DNKN), and Krispy Kreme Doughnuts (NYSE:KKD). Though Little Timmy has lagged behind, that could change, beginning with the five-year strategic plan the company will outline on Feb. 25.
What's going on?
Tim Hortons will hold an investor conference on the morning of Feb. 25. At this event, "the Company plans to communicate its new strategic plan for the next five years." Normally it would be easy for you to dismiss this as the eyewash that every company says ahead of each and every presentation, but in this case there may be much more to it.
For one thing, Tim Hortons is scheduled to release its fiscal fourth-quarter earnings report on Feb. 20. Analysts expect another semi-uneventful report with the company's sales up by 3.5% and earnings per share up by 10%. This isn't bad on the face of it, but it's not nearly as exciting as what we've seen from the company's rivals.
Peers are growing faster -- is Timmy next?
Starbucks for example reported a 12% revenue rise with traffic up 4%. Its earnings per share popped 25% to an all-time high of $0.71. CEO Howard Schulz sees continued rapid growth in sales and earnings for Starbucks even while shoppers retreat from the malls.
Krispy Kreme is seeing quarter after quarter of success as it landed its 20th quarter in a row of positive same-store sales last quarter. Revenue climbed 6.7% and adjusted operating income rocketed 26.5%. Krispy Kreme sees more "accelerated growth domestically."
Meanwhile, Dunkin' Brands as well sees opportunity. Last quarter it reported a revenue gain of 13% and a diluted earnings per share gain of 26.5%. Dunkin' Brands plans to aggressively expand its Dunkin' Donuts brand where it does not yet have locations or where it barely has any presence yet, such as California.
Tim Hortons expansion spree time?
Speaking of expansion opportunities, Tim Hortons currently has 4,350 restaurants. With only 817 of those in the United States and almost all of the others in Canada, Tim Hortons has barely tapped the vast coffee and treat market that exists.
In the last conference call, CEO Marc Caira may have dropped a hint that aggressive United States expansion is coming next. He stated, "Turning to our U.S. business. Our goal is to focus on the core to develop a successful, thriving and profitable business that can be scaled aggressively to become our longer-term growth engine."
"Scaled aggressively." It doesn't sound like Tim Hortons plans to be sticking with 817 U.S. locations much longer.
Caira also gave a number of clues for the upcoming presentation that will outline Tim Hortons' strategy for "sustainable and profitable growth." This includes a number of new menu items, especially outside of the traditional breakfast and lunch hours, and new technology investments to get the drive-through moving more quickly such as the ability to take orders further back in the line.
It seems there is no bigger opportunity available to Tim Hortons than simply "scaling aggressively." For that the company has the largely untapped U.S. market and the almost completely untapped international market. We may get some details on that as well on Feb. 25. Caira said, "Finally, while Canada and the U.S. will remain top priorities, we believe we have longer-term international opportunities."
Foolish final thoughts
Cautious Fools should consider sitting firmly in place until the presentation. Until there are details out, Tim Hortons' future remains somewhat speculative but it could be very promising. The company's locations are nicely profitable and growing, and the environment as judged by Starbucks, Krispy Kreme, and Dunkin' Brands is quite healthy. If Tim Hortons has the right ideas and expansion plans, look for it to post improved growth numbers similar to those of its rivals.