Texas Roadhouse on Thursday night reported a disappointing first quarter, with inclement climate dragging down comparable retailer gross sales. Nonetheless, early indicators of a stronger second quarter had been giving traders hope, nudging the inventory modestly increased in after-hours buying and selling. Income within the quarter ended April 1 elevated 9.6% yr over yr to $1.45 billion, exceeding the LSEG-complied Wall Avenue consensus estimate of $1.44 billion. Earnings per share elevated 1% to $1.70, lacking the $1.76 anticipated. TXRH YTD mountain Texas Roadhouse YTD Backside Line As soon as once more, the Texas Roadhouse outcomes had been a story of two halves. The corporate entered 2025 with tons of momentum and excessive single-digit comparable retailer gross sales, or comps, pushed by a wholesome mix of site visitors and common verify development. This power continued by means of January with comparable gross sales up 5.5%. Nonetheless, the corporate navigated by means of a major slowdown in February as wet, snowy, and chilly climate stored folks indoors and away from eating places, resulting in comp gross sales development of simply 0.5%. Texas Roadhouse’s developments improved as the primary quarter progressed, with March comps rising to 4.6%. But when we take the complete three-month interval collectively, comparable retailer gross sales development slowed to three.5%, pushed by a 1.1% enhance in site visitors development and a 2.4% enhance in common verify. It might not be the excessive single-digit development Texas Roadhouse traders had been accustomed to, but it surely was nonetheless a bit of higher than the three.1% consensus estimate, in response to Bloomberg. All three manufacturers delivered optimistic comps and tariff development through the quarter. Along with Texas Roadhouse, the corporate owns the informal eating chains Bubba’s 33 and Jaggers. Trying ahead, we had been inspired to be taught that top-line developments returned to normalized ranges in March, April, and Might. The truth is, the corporate identified that its common weekly gross sales for March hit all-time highs in any respect three manufacturers. Via the primary 5 weeks of the second quarter, Texas Roadhouse stated its comparable gross sales at firm eating places elevated 5% yr over yr. This places the corporate on tempo to exceed the second quarter consensus estimate of 4.28%, in response to Bloomberg. The corporate’s quarter-to-date disclosure ought to assist ease some investor issues about how the unsure macroenvironment might harm restaurant gross sales and drive folks to commerce right down to different choices or prepare dinner extra at house. In some ways, this replace holds extra weight with traders than the reported outcomes, explaining why the shares had been increased regardless of the earnings miss. Nonetheless, the rise within the full yr commodity price inflation outlook should not be ignored both. These increased anticipated prices will squeeze margins a bit of bit for the remainder of the yr. Our takeaway from the night is that the March rebound and power by means of April present that Texas Roadhouse is a liked restaurant chain due to the worth and enjoyable expertise it affords its clients. Its model retains them nicely geared up to deal with any detrimental twists and turns within the financial system and client spending. For that cause, we’re reiterating our 1 ranking. Nonetheless, in recognition of commodity inflation driving margin strain, we’re lowering our worth goal to $195 per share from $205. Commentary Texas Roadhouse opened eight firm eating places within the quarter, seven of which had been below the namesake model. The opposite one was a Bubba’s 33, which marked that chain’s fiftieth location. With one other 15 eating places already open or below building, the corporate is on monitor to open 30 company-owned eating places this yr. Administration spent $78.3 million shopping for 14 Texas Roadhouse franchises. They plan to accumulate one other three eating places within the second quarter. It is a good use of money as a result of bringing franchise places below the company umbrella provides the corporate extra management over every little thing in its eating places and sometimes result in higher working outcomes. Texas Roadhouse has applied a number of initiatives to reinforce the effectivity of its eating places. One such effort is the rollout of a digital kitchen system, designed to streamline kitchen operations and scale back stress for employees. Round 65% of the corporate’s places have already adopted the system, with the remaining places anticipated to make the transition by yr’s finish. Moreover, the corporate has superior its visitor administration system, enabling operators to offer extra correct wait instances and optimize flooring plan administration. As for money returns to shareholders, the corporate purchased again $50.2 million value of inventory within the quarter. That is about one-tenth of the $500 million share repurchase program it introduced again in February. It additionally represents a rise from the $35.1 million repurchase within the fourth quarter, an indication that administration is prepared to step in and purchase when the inventory is unstable. Why we personal it Texas Roadhouse is a fast-casual steak chin that gives high quality meals at an inexpensive worth in a enjoyable environment, creating one of many extra compelling worth propositions for shoppers within the full-service eating class. A considerable majority firm’s shops are company-owned shops, with solely a small proportion as franchise places. Rivals: Darden (Olive Backyard, LongHorn Steakhouse), Brinker (Chili’s and Maggiano’s), Bloomin Manufacturers (Outback, Carrabbas Italian Grill, BonefishGrill) Portfolio weighting: 2.8% Most up-to-date purchase: April 9, 2025 Initiated: Feb. 4, 2025 Steering As talked about earlier, Texas Roadhouse comparable gross sales at firm eating places elevated 5% yr over yr by means of the primary 5 weeks of the second quarter. The elevated comps had been pushed by 3.1% site visitors development and a 1.9% enhance in pricing. These gross sales received a lift from a menu worth enhance of roughly 1.4% in early April, which is one thing administration beforehand stated they might do. The corporate additionally referred to as out enchancment in combine (gadgets offered) developments, particularly within the entree and appetizer classes. Apparently, the corporate noticed some extra friends commerce up from a hen or seafood entree into steak. Alcohol gross sales are negatively impacting combine by a bit of over half of a share level. Administration has been including mocktails as a means to enhance combine of upper margin gadgets. For 2025, administration reaffirmed most of its outlook. On what did not change, administration nonetheless expects full-year optimistic comparable gross sales development, retailer week development of 5%, wage and different labor inflation of 4% to five%, complete capital expenditures of $400 million, and an efficient tax fee of 15% to 16%. On what did change, the corporate raised its commodity price inflation outlook to roughly 4%, which is the excessive finish of its earlier steering of three% to 4%. For some perspective, when the corporate first gave a 2025 outlook final October, it stated it anticipated commodity price inflation of two% to three%. However that was raised final quarter, primarily on account of an replace on cattle provide expectations. The corporate’s margins are extremely delicate to beef costs. The up to date commodity price inflation outlook was on account of a rise in beef prices anticipated for the remainder of the yr and a 30-basis-point full-year affect from tariffs. On tariffs, seafood is essentially the most impacted portion of its commodity basket since Texas Roadhouse buys most of this class from nations that do not fall below the 2020 United States-Mexico-Canada Settlement. Outdoors of seafood, the corporate stated there aren’t any different vital parts of its commodity basket bought exterior North America. Tariffs are additionally anticipated to have an effect on different gadgets, together with provides like disposable and flatware. Unplanned gear substitute could possibly be impacted by tariffs, too. (Jim Cramer’s Charitable Belief is lengthy TXRH. See right here for a full listing of the shares.) 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A lady enters a Texas Roadhouse restaurant in Arvada, Colorado, on Friday, March 11, 2011.
Matthew Staver | Bloomberg | Getty Photographs
Texas Roadhouse on Thursday night reported a disappointing first quarter, with inclement climate dragging down comparable retailer gross sales. Nonetheless, early indicators of a stronger second quarter had been giving traders hope, nudging the inventory modestly increased in after-hours buying and selling.
