Photo: The Canadian Press. All rights reserved.

A server pours a cup of coffee in Toronto on May 10, 2012. THE CANADIAN PRESS/Chris Young

Tim Hortons boosted its profits in the third quarter, helped by improved sales, but the company also faced a decline in the number of customers at its restaurants.

The coffee, doughnut and fast food chain, which has been grappling with higher competition from its competitors, said third-quarter net income attributable to shareholders was $105.7 million or 68 cents per diluted share.

That was up from $103.6 million or 65 cents per diluted share in the same year-earlier period.

Total revenues increased 10.3 per cent in the three months to Sept. 30 to come in at $802 million, up from $726.9 million.

"We continue to execute on our strategic priorities and deliver top line growth and earnings performance despite continued challenging conditions in the marketplace," said Paul House, executive chairman, president and CEO, in a release.

The company, which doesn't provide specific traffic numbers, said same-store sales transactions were lower in both the U.S. and Canada.

Tim Hortons has launched a wider array of lunch options and specialty drinks in an effort to keep coffee fans coming through their doors after the morning rush, but the response has been mixed at best.

Tim Hortons shares (TSX:THI) fell 3.6 per cent, or $1.78, to $47.73 in Thursday afternoon trading.