Double-double, trouble for Tim Horton’s Inc. (NYSE:THI, TSE:THI) this morning as investors begin to sour on one of Canada’s most iconic brands. Analysts at Goldman Sachs of New York downgraded shares of THI from a neutral rating to a sell rating this morning, marking the first time this year that Tim’s has received a downgrade. Most analysts have a hold rating on the stock and the company itself is on hold in terms of its future direction. It has been over a year since the company’s CEO Don Schroeder forcibly resigned and the hunt for a new leader has been fruitless. Currently the former CEO Paul House is acting as the head cheese while the company floats slowly through limbo.
Tim Horton’s is a Canadian icon in the coffee industry, with over 3,300 stores in Canada and more than 700 other worldwide. It is Canada’s largest fast food service and the only one with over 3,000 locations nationwide. Despite this Canadian domination Tim Horton’s has the lowest operating and profit margins in the quick serve restaurant sector, regularly lagging behind Yum! Brands, McDonald’s, Wendy’s, and Starbucks in terms of bang for your investing dollars.
A Tim Horton’s investor over the past 3 years has been a happy investor, the company has increased its dividend 3 times (now paying 1.59%) and the stock has appreciated over 100% from $25.95 to $58.30. Goldman Sachs thinks this is all about to change as the company has now entered heavily overbought territory and with the downgrade slid 2.1% or $1.11 Monday to $51.80, trailing the Dow Jones Industrial Average by 1.87%. THI has now fallen 12% from its May 2012 high with little resistance as investors begin moving their money towards more lucrative growth opportunities.
Foodbeat’s take: Tim Horton’s without CEO Don Schroeder is a lot like the Indianapolis Colts without Peyton Manning; lagging heavily behind the competition. They pay a lower dividend and make a lower profit margin than their competitors (SBUX, MCD, and YUM) and now worries are mounting about their over-saturation of the Canadian market and lack of growth opportunities. Invest elsewhere.
Source(s): Reuters, Canadian Business