Financing

Tim Hortons’ loyalty program takes off

One-fifth of Canadians are members of the program after just a few weeks, but the chain’s same-store sales fell in the first quarter.
Photograph courtesy of Tim Hortons

Tim Hortons’ loyalty program has proven to be popular with Canadians.

The coffee and doughnut chain said Monday that 20% of the country’s population has used the loyalty program just a few weeks after its introduction.

The program now accounts for 50% of transactions, executives of parent company Restaurant Brands International told analysts Monday.

“We believe this level of participation by Tims guests in the first few weeks of the program [is] more than double the participation rate [of] some of the best-in-class loyalty programs of competitors, even several years after their launch,” RBI CEO Jose Cil said.

The loyalty program didn’t pull in additional sales in the quarter ended March 31, however. Same-store sales at the 4,900-unit chain declined 0.6% in the first quarter, executives said, including a 0.4% decline in Canada, home of the vast majority of the chain’s locations.

The results led to generally disappointing revenue and earnings results at RBI, which also operates Burger King and Popeyes Louisiana Kitchen.

Net income declined 9% to $135 million, or 53 cents per share, from $148 million, or 60 cents. Revenues were up slightly to $1.27 billion. RBI stock declined 3% in morning trading Monday.

Executives said that bad weather across Canada in the first quarter hurt same-store sales by 1% in the quarter.

“I hate using weather as an excuse,” Cil said. “But given the nature of our high traffic and frequency business in Canada, and the severity of the weather impact we experienced in the first quarter, we felt it was necessary to disclose to provide a more accurate picture of our underlying sales performance.”

The company also blamed a weak marketing campaign called Roll Up the Rim. Tim Hortons made additional investments in the campaign and increased the number of giveaways associated with the contest, but its ineffectiveness hurt same-store sales by 0.5%.

That underperformance came amid “enhanced competitive activity in the market,” leading to the lower-than-expected same-store sales.

That first quarter performance halted a yearlong improvement for the chain in the key metric in Canada, culminating with same-store sales growth of more than 2% in the fourth quarter.

Executives, however, believe the brand is still improving behind remodels, loyalty, Breakfast Anytime and other promotions designed to get back into Canadians’ good graces.

Indeed, they said same-store sales were up 1.5% in April. “We do not believe our Q1 comparable sales accurately reflect the underlying strength of the Tims business in Canada,” Cil said.

Still, he added, “We’re not satisfied with 1.5% in April. But it does give us confidence we’re back on track.”

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