It's Always Fresh at Tim Horton's!
Tim Horton's (THI) might just be the most perfect place on earth. For those who have never had the esteemed pleasure of feasting on the coffee and maple-glazed donuts in this bastion of Canadian cuisine, you simply have not yet lived.
But beyond the pleasure that Timmy's offers my palate, THI has also been a pleasure for my portfolio. A relatively young stock (IPO in 2006), Tim Horton's has been paying a dividend since going public. On February 25th they announced they were raising the quarterly dividend by 30 to 35 percent, the third increase since '06.
Today, THI outlined its growth strategy on its investor conference call which includes opening 900 new stores in North America over the next three years. Part of that growth includes further expansion into the U.S. market (primarliy around the Great Lakes regions) and rolling out new design concepts in those U.S. markets to provide further brand differentiation against U.S. competitors (but, let's be honest, nobody in the U.S. can truly compete with the greatness that is Tim Horton's ;P).
THI has seen terrific growth across Canada, with lots of potential left. They've made their mark on Canadians as the true Canadian Shared Experience...a national identity (not an exaggeration, go to Toronto and ask someone where you can grab a donut or a good cup of coffee...their eyes will nearly burst as they shout "Oh, next block on the left, Tim Horton's...or two blocks back that way is another Timmy's. Either one'll give you the best darn donut and coffee of your life, eh!)
Their expansion in the U.S. could be well-timed, as their offerings are at a very reasonable price during tight economic times. A cup of coffee at Tim Horton's becomes a great alternative to Starbucks or Caribou in blue-collar strongholds like Ohio, Michigan and Upstate New York. without the "low-brow stigma" of McDonald's.
THI continues to be a good growth opportunity. I'll be watching the U.S. expansion closely (and praying that one opens up in my little corner of the world). If U.S. same-store sales exceed current expectations, I would see it as a sign of effective brand differentiation and acceptance. Such acceptance could signal potential for aggressive growth across more states.