May 25 (Bloomberg) -- Tim Hortons Inc., the Canadian-based coffee and breakfast chain, has started a search for a new chief executive officer after the surprise exit of Don Schroeder.
Schroeder no longer serves as president and chief executive officer of Tim Hortons, the Oakville, Ontario-based company said today in a statement. Paul House, the executive chairman, was named interim chief executive. Tim Hortons did not give a reason for the management change and Nick Javor, a company spokesman, declined to comment beyond the press release.
“It’s definitely a surprise to investors this morning,” said Christopher O’Cull, an analyst at SunTrust Robinson Humphrey in Nashville, Tennessee. “Don and the board just were not able to reach an agreement for succession planning.” O’Cull advises buying the shares.
The restaurant chain has sought to increase its U.S. business, adding self-serve kiosks to increase brand awareness. Tim Hortons, which competes with fellow coffee-chain operators Dunkin’ Brands Group Inc. and Starbucks Corp., closed 36 underperforming shops in New England recently to focus on other growth areas in the U.S.
Schroeder, who was appointed president and chief executive in 2008, led store expansion during his tenure, expanding the chain to 3,782 locations worldwide, as of April 3. In February, Tim Hortons said it plans to open 120 restaurants in the Middle East over the next five years.
Franchisee to CEO
Schroeder joined Tim Hortons in 1991 as a franchisee with several restaurants. He later became an executive vice president in charge of distribution, manufacturing, real estate and construction.
The board “felt like he wasn’t the right person to execute the five-year strategic plan,” which includes menu innovation and store growth, O’Cull said. “What they’re probably going to look for is somebody with maybe more food-service expertise.”
Net income for the three months ended April 3 slipped 3.7 percent to C$81.41 million, or 48 cents a share, from C$84.57 million, or 45 cents, the year before. Analysts had predicted 51 cents a share. Revenue was C$643.5 million, up 10 percent from a year earlier.
Tim Hortons, along with other restaurants and food companies, has seen higher raw ingredient prices over the past year. The chain experienced “sharp increases” in the prices of coffee and wheat this year, Chief Financial Officer Cynthia Devine said on a conference call earlier this month.
The company declined 82 cents, or 1.8 percent, to C$45.05 at 4:10 p.m. on the Toronto Stock Exchange.
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