Texas Roadhouse Earnings Call: Growth Amid Challenges

Texas Roadhouse ((TXRH)) has held its Q3 earnings call. Read on for the main highlights of the call.

Texas Roadhouse’s recent earnings call highlighted a dynamic blend of achievements and challenges. The company showcased robust revenue growth and ambitious expansion plans, yet faced hurdles such as commodity inflation and declining margins. Despite these financial pressures, significant strides were made in consumer engagement and development, painting a complex picture of the company’s current standing.

Record-Breaking Revenue and Growth

Texas Roadhouse reported a remarkable surge in revenue, surpassing $1.4 billion, marking the highest quarterly growth of the year. This achievement was driven by increases in same-store sales and customer traffic, underscoring the company’s strong market position.

Expansion and Development Success

The company made significant strides in expansion, opening seven company-owned locations in the third quarter and acquiring 20 franchise restaurants this year. Looking ahead, Texas Roadhouse plans to open approximately 35 company-owned restaurants by 2026, indicating a robust growth trajectory.

Positive Consumer Behavior

Consumer preferences leaned towards steaks and larger-sized entrees, with new beverage offerings receiving positive feedback. The company’s regional approach to the beverage menu has been particularly successful, enhancing customer satisfaction.

Strong To-Go Business

The To-Go segment continues to thrive, with notable improvements in speed and order accuracy. These enhancements have significantly contributed to a better overall guest experience, reinforcing the company’s commitment to customer service.

Retail Expansion

Texas Roadhouse’s retail strategy has proven effective, with its products now available in over 120,000 retail outlets nationwide. This expansion has not only increased brand visibility but also strengthened consumer engagement.

Technology Advancements

Approximately 95% of Texas Roadhouse’s restaurants have adopted a digital kitchen and upgraded guest management system. The full rollout of these technological advancements is expected by year-end, promising to streamline operations and improve customer interactions.

Commodity Inflation Concerns

The company faced higher-than-expected inflation in Q3, primarily due to increased beef prices. This has led to an updated full-year 2025 commodity inflation guidance of approximately 6%, highlighting ongoing financial pressures.

Restaurant Margin Challenges

Restaurant margins decreased by 168 basis points year-over-year to 14.3%, driven by commodity inflation and shifts in the on-trade category. This decline underscores the financial challenges the company is navigating.

Diluted EPS Decline

There was a slight decline in diluted earnings per share, down 0.8% to $1.25, reflecting the financial pressures from rising costs and margin declines.

Higher Capital Expenditures

Capital expenditures increased to $214 million, offsetting cash flow from operations. Looking forward, 2026 guidance sets capital expenditures at approximately $400 million, indicating continued investment in growth and development.

Forward-Looking Guidance

Texas Roadhouse’s forward-looking guidance remains optimistic, with plans to open around 30 restaurants across its three brands in 2025 and approximately 35 company-owned restaurants in 2026. The company also anticipates acquiring additional franchise locations and expects commodity inflation rates to rise, with beef prices being a significant factor. Technological advancements are set to be fully implemented by year-end, enhancing operational efficiency.

In summary, Texas Roadhouse’s earnings call painted a picture of a company balancing robust growth and expansion with the challenges of rising costs and margin pressures. The overall sentiment was one of cautious optimism, with significant achievements in revenue and expansion tempered by financial concerns. As the company moves forward, its strategic initiatives in expansion, technology, and consumer engagement will be crucial in navigating the evolving market landscape.