UBS: Tim Hortons Considers Pulling Out of New England

Tim Hortons Inc. (THI) is considering exiting markets in southern New England. The coffee and donut chain’s 10-K filing indicated that if traffic and same store sales don’t improve, it will review whether it should be there, UBS analyst Peter Rozenberg said in a note to clients.

He thinks Tim Hortons’ difficulties there stem from the high penetration of competitor Dunkin Donuts as well as low brand recognition for the Canadian icon.

Mr. Rozenberg points out that Tim Hortons has 42 former Bess Eaton stores in New England and leaving the state could save the company more than C$20-million annually.

“While exiting could underline U.S. risk, we continue to believe that the U.S could be successful due to strong operating capabilities; however, scale and brand recognition will take time,” he said.

Mr. Rozenberg continues to rate Tim Hortons shares a “buy” with a C$42 price target.

Comments

[Malkiel:]

Dunkin' Donuts are practically a public utility in New England, it will take time to wrest market share from them. Still, the format is so much like Dunky D's that I would think they can succeed over time. Build stores where the big "D" isn't and the locals will adopt you.

Name recognition may be a problem--99.9% of the American customers have no clue about Tim Horton being some Canadian hockey hero. A clever name for the American stores may be the key to breaking open the market...

2007 May 29 10:26 AM