OAKVILLE, Ontario ( TheStreet) -- Tim Hortons ( THI) posted strong revenue and earnings growth in the third quarter, but the Canadian coffee shop chain plans to close underperforming stores.

Tim Hortons said third-quarter profits jumped 20.7%, and revenue grew 9.8%, but results were negatively impacted by a $20.9 million asset impairment charge related to underperforming markets in the New England region.
Tim Hortons

Tim Hortons plans to close 36 restaurants before the end of 2010, 34 of which are in the Providence and Hartford markets, as it works to "reinvest in our core growth markets in the Northeast and Midwest U.S. where the brand continues to demonstrate strengthening average unit volumes, cash flows and brand progression."

CEO Don Schroeder said that "we expect this decision to have a positive impact on our U.S. business in terms of our continued business progression and management focus."

Investors were disappointed despite Hortons' healthy top- and bottom-line growth, bidding shares 1.5% lower in morning activity to trade at $38.80.

Hortons said same-store sales, or sales at stores open at least one year -- a closely watched metric in the restaurant industry -- rose 4.3% in Canada and 3.3% in the U.S.

U.S. rival and coffee behemoth Starbucks ( SBUX - Get Report), which posted better-than-expected top- and bottom-line results for the third quarter last week, said it grew global comps by 8% in the recent quarter.

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Burger chain McDonald's ( MCD - Get Report) grew comps 6% globally last quarter, including 5.3% in the U.S., and said the success of its McCafe line of coffee drinks such as Frappes and Smoothies helped drive higher sales.

Even Burger King has gotten into the coffee game and hopes to gain market share, enticing its customers with free cups of java every Friday in the month of November.

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Tim Hortons said Quarterly profits pushed up to $73.8 million, for 42 cents per share, compared with year-earlier earnings of $61.2 million, or 34 cents per share. The increased earnings were attributed to a change in the company's effective tax rate.

Revenue jumped by strong double digit percentages to $670.5 million, from $610.7 million in the third quarter last year.

Hortons' sales results beat expectations for revenue of $657.3 million, but profits came up short. Excluding the asset impairment charge, earnings per share would have been 54 cents, a penny ahead of expectations.

-- Written by Miriam Marcus Reimer in New York.

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