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Tim Hortons to pare back in New England

Chain to close 36 units, will focus U.S. growth in Northeast and Midwest

Tim Hortons Inc. will shutter 36 underperforming restaurants in New England to focus its U.S. growth on the Northeast and Midwest.

The decision led to a $20.9 million asset impairment charge in the third quarter, which swung the U.S. division to an operating loss of $17.5 million, the company said. Same-store sales in the United States, where Tim Hortons has more than 600 restaurants, rose 3.3 percent in the third quarter, down from the year-ago trend of a 4.3-percent increase. The company reported “challenging economic circumstances.”

“We expect [the store closures] to have a positive impact on our U.S. business in terms of our continued business progression and management focus,” Don Schroeder, Tim Hortons’ president and chief executive, said in a statement. “We plan to reinvest a portion of the expected earnings improvement from these closures to increase our brand profile in our U.S. core growth markets where we are building critical mass.”

The closures in New England included the shuttering of 34 restaurants and 18 self-service kiosks in the Providence, R.I., and Hartford, Conn., markets, effectively ending Tim Hortons’ presence in those areas. The company reported that it had lost about $4.4 million from the Providence and Hartford units, whose average unit volumes were about half of those at restaurants in core U.S. markets like Buffalo, N.Y., or Columbus, Ohio.

Tim Hortons also closed two restaurants in Portland, Maine, though some units would remain open in that trade area. The company said it would take up to $30 million in lease and other closing costs in the fourth quarter.

The New England market is a Dunkin’ Donuts stronghold, and competition for coffee, bakery café items and breakfast has been heightened with major initiatives from quick-service players including McDonald’s and its McCafe introduction and Subway and its Seattle’s Best launch.

On a consolidated basis, Tim Hortons posted a 20.7 percent increase in net income for the quarter ended Oct. 3. It earned $73.8 million, or 42 cents per share, compared with year-earlier third-quarter earnings of $61.2 million, or 34 cents per share.

All financial results are stated in Canadian dollars, which as of Thursday had reached near parity with the United States dollar.

Latest-quarter revenue increased 9.8 percent to $670.5 million. Same-store sales rose 4.3 percent at Canadian restaurants.

The Oakville, Ontario-based brand has 3,082 restaurants in Canada.

Contact Mark Brandau at [email protected].

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