TXRH Q1 2025: Same-store comps rebound 5% in early Q2
- Robust Same-Store Sales Recovery: Management highlighted that after a challenging start, same-store sales rebounded strongly—with average weekly sales reaching about $164K in early Q2 and same-store sales up 5% over the first five weeks—reflecting resilient guest traffic and improved mix trends.
- Operational Efficiency Through Technology: The executives emphasized ongoing conversion to a digital kitchen and AGM 2.0 enhancements that are streamlining back-of-house operations, improving throughput, and boosting labor productivity, which are expected to drive longer-term cost efficiencies.
- Disciplined Pricing and Margin Management: Despite pricing below overall inflation (with adjustments from 3.1% down to 2.3%), the management is focused on methodical pricing decisions and leveraging mix shifts—such as an uptick in higher check items—to protect margins under commodity pressures.
- Margin Pressure: The company experienced a 2.2% decline in restaurant margin dollars per store week to approximately $27,000, which raises concerns about maintaining profitability amid cost pressures and a choppy start to the year.
- Commodity Inflation Impact: The guidance for full-year commodity inflation was raised to approximately 4%, partly due to tariffs contributing about 30 basis points of pressure, indicating potential cost pressures that could squeeze margins further.
- Underpricing Relative to Inflation: The pricing strategy shows a downward trend—from 3.1% in Q1 to 2.3% in subsequent quarters—suggesting the company is pricing below commodity and wage inflation levels, which may exacerbate margin erosion over time.
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue | +9.6% (from $1,321.22M in Q1 2024 to $1,447.65M in Q1 2025) | Total revenue increased driven by overall operational improvements including higher guest traffic and expanded operations. This reflects a continuation of the positive trends seen in previous periods where enhanced comparable restaurant performance and store week growth contributed to revenue gains. |
Restaurant and other sales | Increase from $1,314.15M in Q1 2024 to $1,440.34M in Q1 2025 | Sales growth is in line with improved operational metrics such as better guest traffic and enhanced average pricing, reflecting the strategy that boosted results in previous periods. |
Franchise royalties and fees | Increased modestly from $7.07M in Q1 2024 to $7.31M in Q1 2025 | Franchise fees saw limited growth driven by stable franchise comparable performance and a slight uptick in overall franchise activity, which follows the modest gains previously observed. |
Food and beverage costs | +10.3% (from $445.09M to $490.99M) | Costs increased notably due to higher volumes as sales expanded, combined with rising commodity expenses (such as increased beef costs). This cost pressure is consistent with prior trends where operating expansion led to higher raw material outlays. |
Labor expenses | +12.2% (from $427.55M to $479.98M) | Labor expenses rose as the company added staff in line with new restaurant openings and wage inflation. The increase is proportionately higher than revenue growth, mirroring similar challenges seen in previous periods. |
Rent expenses | +15.7% (from $19.43M to $22.48M) | Rent expenses jumped likely due to increased occupancy from new locations and potential lease escalations. This sharper rise compared to other costs underscores a more aggressive expansion strategy relative to prior periods. |
Pre‐opening expenses | -15.8% (declined from $8.10M to $6.81M) | Pre‐opening expenses declined as improved operational efficiencies were implemented and fewer costs were incurred per new opening. This reduction contrasts with previous spending patterns and reflects better cost controls during the launch phase. |
Operating income | Essentially unchanged (approx. $134.73M vs. $133.13M) | Stable operating income indicates that higher revenues were largely offset by increased operating costs (food, labor, rent), echoing the balancing effects observed in prior periods where margin pressures persisted despite growth. |
Net cash provided by operating activities | Decreased slightly (from $243.44M to $237.74M) | Operating cash flow dipped slightly due to less favorable working capital changes, even as depreciation and rising net income continued to support cash generation. This is consistent with prior period trends where minor operational adjustments impacted cash conversion. |
Financing activities outflows | Increased from $59.57M to $106.32M | Financing outflows escalated likely due to increased debt repayments or other financing costs associated with expansion, which contrasts with the lower outflows seen in the previous year. |
Net change in cash | Reversed from +$109.18M to -$24.14M | Net cash swung from positive to negative, reflecting the combined effects of a slight reduction in operating cash inflows and a significant increase in financing outflows. This shift marks a departure from the favorable cash accumulation seen in the prior period. |
Total assets | +12.7% increase (reaching $3,191.13M) | An increase in total assets is primarily attributable to continued capital investments and reinvestment of higher operating results. This reinforces the strengthening balance sheet observed over prior periods. |
Stockholders’ equity | +14.4% increase (to $1,380.12M) | The growth in stockholders’ equity reflects improved retained earnings and possible capital contributions, further cementing a stronger financial base compared to previous periods. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Wage and Labor Inflation | FY 2025 | no prior guidance | 4% to 5% | no prior guidance |
Commodity Inflation | FY 2025 | no prior guidance | 3% to 4% | no prior guidance |
Capital Expenditures | FY 2025 | no prior guidance | Approximately $400 million | no prior guidance |
Menu Pricing | FY 2025 | no prior guidance | 1.4% menu price increase | no prior guidance |
New Restaurant Openings | FY 2025 | no prior guidance | Approximately 30 company-owned openings | no prior guidance |
Income Tax Rate | FY 2025 | no prior guidance | 15% to 16% | no prior guidance |
Dividend | FY 2025 | no prior guidance | 11% increase to the quarterly dividend | no prior guidance |
Share Repurchase Program | FY 2025 | no prior guidance | $500 million share repurchase program | no prior guidance |
Investment Costs for New Units | FY 2025 | no prior guidance | $8.5 million to $8.6 million | no prior guidance |
| Metric | Period | Guidance | Actual | Performance |
|---|---|---|---|---|
Income Tax Rate | Q1 2025 | 15% to 16% | ~14.8% (20,200 / 136,259) | Missed |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Same-Store Sales and Traffic Trends | In Q4 2024, Q3 2024, and Q2 2024, comparable sales surged with mid‐to‐high single‐digit increases and strong monthly performance. | In Q1 2025, comparable sales grew by 3.5% driven by 1.1% traffic and a 2.4% check increase, with weather-related issues and seasonal factors noted. | Growth has moderated from robust historical figures, yet the underlying fundamentals remain positive with cautious optimism. |
Pricing Strategy and Mix Adjustments | Prior periods (Q4, Q3, Q2 2024) featured methodical price increases (0.9%–3.1%) along with mix adjustments such as offsetting negative alcohol mix with positive entrée and mocktail trends. | Q1 2025 maintained a 3.1% pricing run rate (dropping to 2.3% later) and reported continued positive mix trends, although alcohol mix remains slightly negative (down 0.5 percentage points). | The company continues its conservative pricing approach with careful mix management; sentiment is steady and balanced despite operating below inflation. |
Operational Efficiency and Digital Transformation | Q3 and Q2 2024 highlighted digital kitchen conversions and upgraded guest management systems, promising improved operational efficiency. | Q1 2025 reported 65% of restaurants using digital kitchens and 70% upgraded to the new guest management system, reinforcing the technology push. | There is a continued and growing commitment to digital initiatives with an optimistic outlook on efficiency gains. |
Commodity Inflation and Rising Input Costs | Q4 2024 reported very low commodity inflation (0.7%) with a modest outlook, while Q3 and Q2 2024 forecast inflation levels in the 2%–3% range. | Q1 2025 upwardly revised full‐year commodity inflation guidance to about 4%, reflecting higher beef costs and tariff impacts (estimated 30 basis points). | An upward shift in inflation expectations indicates emerging pressure; sentiment is cautious and vigilance has increased regarding input costs. |
Margin Pressure and Profitability Management | Q3 and Q2 2024 showed strong margins with some pressures from bonus payouts and cost adjustments, though profitability was largely robust. | Q1 2025 observed a slight decline in restaurant margin dollars amid higher labor and commodity pressures, triggering close monitoring by management. | There is heightened concern over margin erosion in Q1 2025 even as management remains proactive; overall sentiment turns more cautious. |
Expansion Strategy and New Restaurant Openings | Q4, Q3, and Q2 2024 detailed aggressive expansion via company-owned openings, franchise growth, and acquisitions with targets around 30+ new units annually. | Q1 2025 reported 8 new company-owned openings along with franchise acquisitions, reinforcing a robust expansion agenda. | The expansion strategy remains consistent and aggressive with no signs of slowing; sentiment continues to be largely upbeat. |
Expansion Execution and Integration Risk | Q3 2024 mentioned acquisition agreements (e.g., a tentative deal for 13 restaurants) and disciplined expansion execution, with Q2 2024 describing steady new openings, implying integration challenges. | Q1 2025 noted integration considerations such as higher rents on acquisitions, particularly in California. | While expansion remains robust, there is an emerging focus on integration risks and execution challenges; sentiment is cautiously attentive. |
External Factors Impacting Sales (Weather, Illness, Calendar Shifts) | Q4 2024 experienced weather disruptions (winter storms), illnesses, and calendar shift impacts (e.g., Valentine's moved to a Friday), with Q3 and Q2 showing isolated weather events and bounce-backs. | Q1 2025 reported weather-induced store closures and increased influenza cases in February, alongside nuanced calendar shifts affecting reported sales. | External factors continue to cause variable short-term disruptions, but the business remains resilient; sentiment is cautious yet confident in recovery. |
Underpricing Relative to Inflation | Q3 and Q2 2024 emphasized a conservative pricing approach that kept prices well below inflation levels, while Q4 included analyst questions on protecting margins. | Q1 2025 reaffirmed a strategy of underpricing relative to inflation, with pricing at 3.1% against a 4% commodity inflation backdrop and plans for a cautious future review. | The conservative pricing strategy is consistent across periods; sentiment remains focused on balancing affordability with cost pressures. |
Tariff and Trade-Related Cost Pressures | This topic was not discussed in Q4, Q3, or Q2 2024. | Q1 2025 introduced tariff concerns, highlighting impacts on seafood, supplies, and equipment, and incorporated an estimated 30 basis points into commodity inflation guidance. | This is a new focal point in Q1 2025, signaling increased attention to trade-related cost pressures; sentiment is more alert to external cost factors. |
Negative Alcohol Mix Impacts | Q4 2024 reported about 30 basis points of negative mix, Q3 indicated roughly 20 basis points negative impact, and Q2 showed persistent negative trends. | Q1 2025 noted alcohol mix down by a little over 0.5 percentage points, aligning with previously observed negative trends. | The negative alcohol mix impact remains a consistent challenge with similar magnitude across periods; sentiment regarding this issue stays cautiously negative. |
Incremental Cost Pressures (CAPEX, G&A, Labor Costs) | Q3 and Q2 2024 detailed rising CAPEX (around $360M–$370M), increased G&A expenses, and labor inflation in the 4%–5% range, with Q4 discussing similar trends and some operating cost relief. | Q1 2025 reported increased G&A growth (6.9% YoY), labor inflation at 4.6%, and maintained CAPEX guidance near $400 million for 2025. | Incremental cost pressures persist with slight upward adjustments, necessitating proactive cost management; sentiment is cautious yet methodical in addressing these challenges. |
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Margin Outlook
Q: How were restaurant margins affected?
A: Management noted that Q1 margin growth was softer than prior periods due to mix and commodity pressures, but they expect improvements later despite strong operating performance. -
Pricing Strategy
Q: Are you pricing below inflation?
A: They confirmed Q1 pricing was 3.1%—falling to 2.3% in upcoming quarters—remaining below both commodity and wage inflation pressures. -
Commodity Pressure
Q: What is commodity mix pressure?
A: Management explained that 2.1% commodity inflation combined with mix shifts imposed about 30bps of margin pressure, which is expected to ease to 20bps and then 10bps in Q4. -
Labor Efficiency
Q: How is labor leverage trending?
A: They maintained strong productivity with labor hours growing at only 35% of traffic, significantly better than the historical 50% ratio. -
Rent Impact
Q: What’s driving higher rent expenses?
A: Rising rent—around a 7-8% increase—was attributed to recent acquisitions in higher-cost markets like California, which may slightly weigh on margins. -
To-Go Sales
Q: How do to-go sales impact margins?
A: Expanded to-go sales now contribute margin-neutrally or slightly positively, especially when dining rooms are full, though they miss beverage attachments. -
Operational Efficiency
Q: Are tech upgrades improving operations?
A: The rollout of digital kitchens and enhanced guest management systems is easing back-of-house stress and improving throughput, though measurable efficiency gains are still emerging. -
Comp Performance
Q: What drove recent comp fluctuations?
A: Management attributed uneven comps to weather and holiday timing effects, with a bounce-back leading to about 5% comp growth in the latest five-week period. -
Cost and G&A Trends
Q: Any unusual labor or G&A cost drivers?
A: They reported standard outcomes with labor in line with 4.5% inflation and G&A growing in the mid-single digits, with no unexpected items noted. -
Store Performance
Q: How are new store units performing?
A: Newer stores are showing initially lower unit volumes in certain regions, which is consistent with market expectations and historical trends. -
Franchise Strategy
Q: What’s the plan with franchise acquisitions?
A: They continue proactive discussions with franchisees, with no plans to refranchise company-owned Texas Roadhouse units and an ongoing focus on growing Jaggers franchises. -
Bar Menu Relaunch
Q: What about the bar menu relaunch?
A: Responding to consumer demand, a revamped bar menu featuring $5 all-day beer and margaritas is set to roll out, aimed at boosting guest appeal and sales.
Research analysts covering Texas Roadhouse.