Tim Horton’s vs. Starbucks -umm, both losers
I’m sure the title’s got your attention - probably not used to seeing Tim Horton’s or Starbucks beside the word “losers”. For those of you don’t know Tim Horton’s, you’re definitely not Canadian. Tim Horton’s, rather “Tims” (as it is affectionately known in Canada), is Canada’s largest fast food chain. Now you’re probably wondering why then I’m calling it a loser.
The coffee and doughnut chain (thus it’s comparison with Starbucks) said Friday that second-quarter profit fell 12%, despite higher revenue, because of a higher tax rate. Owned by U.S. fast food chain Wendy’s International, Tim Hortons said it earned $67.2-million ($63.4-million USD), or 36 cents a share; which is down from a profit of $76.3-million, or 39 cents, in the year-before period. The company is looking to push its stores south of the border, where it faces stiff competition and lack of brand recognition.
Speaking of south of the border (that’s you - Americans), I now come to the suffering Starbucks. Unlike in Canada, Starbucks actually sells in America - right? Apparently their stocks don’t tell the same story. There are several reasons the stock is trading near a 52-week low. First of all, the company is being over-optimistic. The chain is looking to expand itself to 40,000 stores. Apparently, when a company says that it plans on growing as big, or even bigger than a company like McDonald’s, investors think it’s just a fairytale - yes, even for a company like Starbucks. The company has also come short in sales for the quarter, versus Wall Street estimates - a big deal when you’re planning massive expansion. The company also had senior executives selling nearly half-a-million shares during the past 6 months, despite the stock’s slide - insider selloff?
All in all, you can now make some sense out of the title. We are also now seeing other fast food chains such as McDonald’s, Dunkin’ Donuts, and Burger King, heating up their menu with fancy coffee lines. These introductions have, and will continue to undoubtedly slash some business from the coffee and doughnut franchises. Maybe a plain cup of coffee isn’t like the blue jeans after all - it needs some innovation to survive.
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…And now, with 1,700 Starbuck stores readying to open, the company may be missing the mark altogether.
My colleague at TopRight commented on this at .
I believe we are all wondering how long businesses like these can go on with the status quo without innovation.