OAKVILLE, Ont. - Tim Hortons Inc. (TSX:THI) is pulling the Cold Stone Creamery brand from its Canadian restaurants, a move that the company says will allow franchise owners to focus on their core business.
The chain's decision to end ice cream sales in Canada cost Tim Hortons about $19 million in the fourth quarter but will help simplify its menu, which has grown far beyond coffee and doughnuts.
Its partnership with the American dairy chain Cold Stone Creamery, which began in 2009, will continue in the U.S. Tim Hortons locations.
The announcement came Thursday as Tim Hortons reported it had $898.5 million of revenue during the fourth quarter, up 10.7 per cent from a year earlier, but a smaller profit than analysts were expecting.
Tim Hortons had 69 cents per share of net earnings attributable to common shareholders, up from 65 cents a year in the fourth quarter of 2012 but below analyst estimates of 77 cents per share.
The net income amounted to $100.6 million, up marginally from $100.3 million a year earlier.
The per share profit increase was stronger because the number of shares outstanding decreased by 5.6 per cent over the 12-month period as the company bought back its own shares.
Tim Horton's operating income fell by 1.8 per cent to $147.8 million, in part because of the Cold Stone Creamery de-branding and also by the decision to close some underperforming U.S. restaurants.
The U.S. closures resulted in a $6.6 million charge in the fourth quarter.
Tim Hortons has been expected to outline its new CEO's plans for refreshing the company's image and operations, amid increased competition for coffee drinkers.
For investors, Tim Hortons announced Thursday that its dividend will increase by 23 per cent to 32 cents per share, payable March 18, up six cents per share.
It also renewed its share buyback program, which gives the company the ability but not the obligation spend up to $440 million to buy back shares from the public market for cancellation.
Under its 2013 normal course issuer bid, the company bought back the maximum allowable 15,239,531 shares at an average price of $59.88 each â€” about $912.5 million in total.
"During the fourth quarter, we made important strides to position the Company for further success," Marc Caira, Tim Hortons president and CEO, said in a statement Thursday
"We have worked to enhance our capital structure, as well as simplify our operations, strengthen our menu, and refresh our restaurants, all to provide the ultimate guest experience."
"I believe the choices we are making today and the strategic roadmap we are developing will set the stage for continued long-term growth and profitability."
During the quarter, same-store sales at its Canadian segment grew 1.6 per cent due to a higher average purchase. However, operating income in the Canadian segment was down 2.3 per cent to $165.5 million, largely because of the Cold Stone Creamery decision.
Its U.S. segment saw a 3.1 per cent increase in same-store sales but produced an operating loss of $1.1 million, down from a year-earlier operating profit of $2.4 million.
The U.S. segment recognized $6.6 million in costs during the quarter for the closure of an unspecified number of weak locations. It also added 53 restaurants during the quarter.
Tim Hortons also reported higher expenses at the corporate level, in part because of its strategic activities, resulting in a corporate operating loss of $18.1 million, up from $14.1 million a year before.
Caira will take the stage at the company's investor day on Tuesday to further describe the next steps for the company.
Before he joined Tim Hortons, Caira held various executive roles at Nestle's global operations where he helped expand the company's hot and cold beverage division. He has said his experience with Nestle meant he arrived at Tim Hortons thinking like a customer.
Caira told The Canadian Press last fall that service at the counter is the "moment of truth" that determines whether a customer is pleased enough to make a return visit.