TORONTO — Tim Hortons stock has been downgraded to a “sell” rating at Goldman Sachs due to concerns of an increasingly competitive coffee market.
Goldman Sachs analyst Michael Kelter, who announced the downgrade, is predicting a same-store traffic decline in 2012, due to the company reaching “Canadian saturation” amid growing competition.
Analyst cited three reasons for the downgrade, including the state of the economy, moderate growth into international markets and concerns over a potential new CEO and new product offerings such as K-Cups.
Other analysts remain optimistic. “It’s still a very value-oriented product,” Brian Yarbrough, an Edward Jones research analyst, was quoted as saying by the Calgary Herald. “They’ve been able to increase prices many years now, and they’re adding new menu items , which are higher priced, which drive the ticket higher and drives that same-stores sales account.”
Tim’s has added a variety of new offerings in recent months, including premium espresso-based coffee, lemonade beverages, grilled paninis and free Wi-Fi service.
The stock fell 2.6 per cent on the TSX this morning, and it was down 2.95 per cent on the NYSE.
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