Key Takeaways
- Earnings per share (EPS) of $1.79 surpassed analysts' estimate of $1.64.
- Total revenue reached $1.341 billion, slightly above the estimate of $1.339 billion.
- Comparable restaurant sales increased by a solid 9.3% at company-owned locations.
Texas Roadhouse (TXRH -0.37%), a leading casual dining restaurant chain, released its Q2 2024 earnings on July 25, showcasing strong financial results. The company outperformed analysts' expectations, highlighting its effective operational strategies and robust demand.
Texas Roadhouse reported earnings per share (EPS) of $1.79, beating the estimate of $1.64 by $0.15, or 9.1% better than expected. Revenue reached $1.341 billion, just slightly beating an expected $1.339 billion. These results underscore the company's continued growth and efficient cost management amidst rising labor and commodity costs.
| Metric | Q2 2024 | Analysts' Estimate | Q2 2023 | % Change YoY |
|---|---|---|---|---|
| Earnings Per Share (EPS) | $1.79 | $1.64 | $1.22 | 46.7% |
| Total Revenue ($ million) | 1,341 | 1,339 | 1,171 | 14.5% |
| Net Income ($ million) | 120.1 | N/A | 82.3 | 46.0% |
| Source: Analyst estimates for the quarter provided by FactSet |
Overview of Texas Roadhouse
Texas Roadhouse is known for its steaks and hearty Southwestern cuisine, operating primarily in the casual dining segment. The company places a strong emphasis on quality food and customer experience, supported by its operational efficiency and cost management.
Recently, the company has focused on enhancing its food quality, consistency, and service, with key success factors including strategic menu pricing actions and incremental improvements in labor productivity. This dual approach has enabled significant growth in comparable store sales and restaurant margins.
Quarterly Highlights
Company-owned restaurant sales increased by 9.3%, and domestic franchise sales grew by 8.3%. Average weekly sales rose to $158,991 from $146,727 a year ago, while to-go sales climbed to $19,975 from $18,496 for the same period.
On the earnings front, EPS surged 46.4% year-over-year to $1.79, driven by expanded restaurant margins, which grew from 15.7% to 18.2%. The increase in margins was primarily due to higher average guest checks and improved labor productivity, counteracting wage and commodity inflation.
Texas Roadhouse opened six company restaurants and three franchise restaurants during the quarter. Capital expenditures stood at $77.8 million, with dividends paid at $40.7 million and stock repurchases amounting to $26.2 million.
Notable Quarterly Developments
During the quarter, Texas Roadhouse unveiled several strategies that contributed to its impressive results. A key element was its pricing strategy, which adjusted menu prices to balance cost pressures without compromising customer demand. The positive effects were evident in the increased average unit volumes and expanded restaurant margins.
The company improved labor productivity even as wage inflation stood at 4.4% and commodity inflation at 0.4%. Furthermore, Texas Roadhouse continued its investment in quality and consistency of food, reinforced by proprietary recipes and daily steak cuts performed on-premises.
The company also demonstrated commitment to high service quality and customer experience by maintaining low table-to-server ratios and engaging in local marketing and community activities to bolster repeat business.
Operational efficiency remained a prime focus, evidenced by effective management of operating hours and site selection, all calculated to maximize profitability.
Looking Ahead
For the upcoming quarters, management is optimistic about continued growth. The company has already reported an 8.0% increase in comparable restaurant sales for the first four weeks of Q3. The company anticipates moderate commodity cost inflation of approximately 2% for the rest of the year and maintains an effective tax rate around 14.5%.
Capital expenditures for the full year are expected to be between $360 million and $370 million. Investors should monitor these areas closely, along with any additional strategic pricing actions or operational efficiencies that might affect future financial performance.
