Texas Roadhouse (TXRH -0.37%), a popular American casual dining chain known for its steaks and southwestern-themed restaurants, published its third-quarter 2024 earnings on October 24, 2024.
It reported impressive results with revenue hitting $1.27 billion, marking a 13.5% increase over last year's $1.12 billion. Although there were no specific analyst estimates, Texas Roadhouse's earnings significantly outpaced prior numbers, driven by robust comparable restaurant sales and enhanced operational efficiency. The company's net income climbed to $84.4 million, a 32.3% increase from $63.8 million in Q3 2023, while diluted earnings per share grew from $0.95 to $1.26, a 32.5% rise.
These results reflect a solid quarter for Texas Roadhouse, which continues to expand its restaurant network and improve its dining experience while navigating inflationary challenges.
| Metric | Current Period (Q3 2024) | Prior Year (Q3 2023) | Change |
|---|---|---|---|
| Total Revenue (billion) | $1.27 | $1.12 | 13.5% |
| Net Income (million) | $84.4 | $63.8 | 32.3% |
| Diluted EPS | $1.26 | $0.95 | 32.5% |
| Restaurant Margin | 16.0% | 14.6% | 140 bps |
Source: SEC filings.
Overview of Texas Roadhouse's Business
Founded in 1993, Texas Roadhouse has become a staple in the casual dining industry with its renowned steak offerings and lively southwestern atmosphere. The company operates through various concepts, including Bubba’s 33 and Jaggers, providing a diverse menu to appeal to a wide customer base. As of late 2023, it had over 635 company-owned and 106 franchised restaurants spread across numerous states and international locations.
Texas Roadhouse is deeply committed to its expansion strategy, focusing heavily on selecting strategic sites. Its target is to tap into favorable market demographics to ensure new outlets hit financial targets. The company’s recent efforts also highlight its ongoing dedication to food quality and creating a welcoming dining atmosphere. These operational aspects, coupled with continuous menu enhancements, serve as key pillars supporting customer satisfaction and long-term growth.
Quarterly Highlights and Developments
This quarter, Texas Roadhouse opened ten new restaurants — seven company-owned and three franchised. The restaurant network has grown to more than 770 locations. The company's expansion aligns with its strategic goal of footprint growth both domestically and abroad, leveraging such growth to drive revenue increases and shareholder value. Chief Executive Officer, Jerry Morgan, expressed confidence in the company's development pipeline, which remains strong for 2025.
The company posted a notable 8.5% increase in comparable sales for company-owned restaurants, along with a 7.2% increase for domestic franchises. Such sales are crucial as they reflect ongoing consumer demand and brand resonance. The company continues to focus on providing high-quality dining experiences, attributing success to its operators who grow traffic at each brand.
Operational efficiency was another focus, as the restaurant margin percentage rose from 14.6% to 16.0%, driven by improved labor productivity and pricing strategies. By increasing menu prices by approximately 0.9% in September, Texas Roadhouse managed inflationary pressure while keeping its value proposition intact. Wage inflation was reported at 4.5%, with commodities cost inflation slightly under 1%, showing a sound balance in cost management.
A significant one-time expense was the capital allocation, which totaled $91.1 million in the quarter, along with $40.7 million paid in dividends and $9.6 million spent on stock repurchases. These financial maneuvers reflect the company’s commitment to shareholder returns and strategic investments in its growth trajectory.
Furthermore, the company's various restaurant concepts played a role in addressing evolving consumer preferences, with Bubba’s 33 seeing a 5.3% rise in comparable sales.
Outlook and Future Trajectory
Looking ahead, Texas Roadhouse remains optimistic, with management projecting continued growth through comparable restaurant sales and strategic location openings, despite inflationary challenges. For 2025, it expects to invest around $400 million in capital expenditures, aimed at technological improvements and accelerating expansion efforts.
Investors are advised to watch for wage and commodity inflation impacts, though Texas Roadhouse's selective pricing strategy should help manage these pressures. The company's growth plans underscore its continued efforts in technology enhancements and operational excellence to maintain its position in the competitive dining space.
