Tim Hortons: Can Ice Cream Help Boost Sales?

Jun.16.09 | About: Restaurant Brands (QSR)

Could a late-day ice cream fix be just what Tim Hortons Inc. (THI) needs?

A decision to test market co-brand its new Cold Stone Creamery chain at six restaurants in Ontario could help the coffee and baked goods giant could help boost evening sales, analysts say.

“We view this move as a strategic and financial positive for Tim Hortons,” analyst Turan Quettawala of Scotia Capital said in a note to clients.

If the test was extended to more standard Canadian stores — there are 2,104 -- it could represent a material financial benefit to the company, he added, and could help drive evening traffic.

[That] is a growth opportunity for Tim Hortons, as only 15% of its [customer visits] are in the evening. This move also provides an additional product suite, which may result in more consumers opting for Tim Hortons as a dinner option, leading to a higher average cheque.

He rates the shares "outperform" with a price target of C$35.