Blackmont Puts Tim Hortons' Success Down To Loyalty

| About: Restaurant Brands (QSR)

What is the secret ingredient to Tim Hortons Inc.’s (THI) rising prospects and leading share at 11% of the Canadian quick-service restaurant market? Loyalty, says Blackmont Capital’s Barbara Gray.

Initiating coverage on the iconic coffee and donut chain with a “buy” recommendation and C$47.50 price target, the analyst said it offers a “rare, desirable combo of functional and emotional appeal” that translates into a strong brand and high customer loyalty. In fact, she said “Tim Hortons’ loyal customer following gives its brand a legendary status.”

Ms. Gray also highlighted its ability to establish multi-generational relationships with customers and a high level of community involvement.

She pointed to Tims’ high sales growth, which she forecasts will rise 9.5% per year in the next decade. Expected unit growth of 5.5%, or 130 units per year in Canada and 100 per year in the more competitive U.S. market, should also help.

Same-store sales growth comes in at 3.8%, which Ms. Gray says is a reflection of the new Tim Card, focus on the lunch market segment, pricing inflation and appeal to the Baby Boom population.

THI 1-yr chart: