08/12/2013 12:25 EDT

Tim Hortons' Corporate Communications Earn It A Black Eye In Rittenhouse Rankings


Tim Hortons ranks among the most secretive publicly-traded companies in a new ranking of corporate candour, and that may be part of the reason the Canadian coffee and donut chain is struggling to make inroads in the U.S.

In a recent survey, communications consulting firm Rittenhouse Rankings rated Tim Hortons as seventh-worst when it comes to corporate candour.

The Rittenhouse survey takes a unique approach to measuring secrecy: It analyzes the language used by the company in its public statements, and measures instances of candour against instances of “FOG” — “fact-deficient, obfuscating generalities.”

The survey then calculates a ratio of “candour to FOG” and ranks companies accordingly.

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The Most Secretive Companies: 24/7 Wall St.

Tim Horton’s 2011 letter to shareholders “was one of the shortest included in the survey and still contained far more FOG than useful information,” the Rittenhouse survey said, as quoted at 24/7 Wall Street.

Rittenhouse Rankings says there are real financial consequences for companies that fail to communicate properly. The 25 most candid, communicative companies in the rankings outperformed the S&P 500 by nearly double, growing their share price by 34.2 per cent, compared to 17.1 per cent for the S&P 500 as a whole.

The 25 least communicative companies underperformed the S&P by about one percentage point.

Not so for Timmies, though, which — like other coffee chains — has seen its share price spike this year. It was up 22 per cent on the year as of last month, and hit an all-time high last week, on the strength of a $900-million share buyback.

Laura Rittenhouse, president of the consultancy, says it’s a good bet that companies which don’t communicate well with the public are probably struggling to communicate internally as well.

“If the CEO is communicating to the owners with this degree of obfuscation, it’s likely [he or she is] communicating this way internally,” 24/7 Wall Street quoted Rittenhouse as saying.

The survey suggests that, for Tim Hortons, substandard communication may be hobbling the company’s efforts to gain a foothold in the U.S. market. Rittenhouse cited an Edward Jones analyst who recently said Tim Hortons is failing to distinguish itself in the competitive U.S. coffee chain market.

Despite years of expansion into the U.S., Tim Hortons holds only a 2.7-per-cent share of the coffee shop market there. Several of the company’s largest investors recently started putting pressure on Tim Hortons to spend less of its money on expanding into the U.S. and more on buying back publicly-traded shares.

Tim Hortons took that advice to heart last week, announcing it would spend $900 million on a share buyback. The company also said it will look at changing how it’s expanding in the U.S. It’s exploring the possibility of partnering with other investors to fund future expansions.

I very much see the U.S. as being a must-win market for us,” Tim Hortons CEO Marc Caira said recently.

“Based on the dynamics of the market, and the footprint we already have created, I believe the U.S. represents an opportunity for significant long-term earnings growth for us.”