Texas Roadhouse (TXRH -0.31%) reported its fourth-quarter 2024 earnings on February 20, 2025, capping off what CEO Jerry Morgan described as a "memorable year" for the company. The casual dining chain delivered strong performance across its portfolio of brands, with positive traffic growth leading to record-setting average unit volumes. These insights provide important context for long-term investors evaluating the company's competitive position and growth trajectory.
1. Traffic Growth Continues to Outpace the Industry
In a restaurant environment where many competitors struggle to maintain customer counts, Texas Roadhouse's ability to drive guest traffic rather than relying solely on price increases demonstrates the enduring appeal of its value proposition.
2024 was a memorable year for Texas Roadhouse with strong performance in all aspects of our business. Thanks to positive traffic growth at all three brands, revenue grew to nearly $5.4 billion, and average unit volume exceeded $8 million for the first time in our history.
-- Jerry Morgan, Chief Executive Officer
For the full year 2024, the company generated an 8.5% increase in same-store sales, with 4.4% coming from traffic growth. The fourth quarter showed similar strength with a 7.7% comparable sales increase, including 4.9% traffic growth. This consistent traffic outperformance validates the company's strategic positioning and operational execution in a challenging consumer environment.
2. Value Positioning Remains Central to Strategic Approach
Texas Roadhouse continues to prioritize value perception over short-term margin gains, a strategy that appears to be driving its traffic outperformance relative to competitors.
Based on these [menu pricing] calls, we will be implementing a 1.4% menu price increase at the beginning of the second quarter. We are confident this level of pricing maintains our everyday value, which has always been one of our competitive advantages.
-- Jerry Morgan, Chief Executive Officer
The company's conservative pricing strategy stands in contrast to more aggressive increases taken by many peers. After implementing the 1.4% increase in the second quarter of 2025, the company will carry 2.3% pricing on the menu through most of 2025 -- notably below inflation rates. Management highlighted several value-focused offerings already in place, including an early dine feature with discounted items and a $5 all-day everyday drink menu.
3. Expanding Restaurant Margins Despite Cost Pressures
Despite inflationary pressures, Texas Roadhouse delivered significant restaurant-level margin improvement, showcasing the operating leverage in its model as sales volumes grow.
Restaurant margin dollars per store week increased 20.8% year-over-year to approximately $26,000. Restaurant margin as a percentage of total sales increased 172 basis points to 17%.
-- Michael Bailen, Head of Investor Relations
For the full year, restaurant margins improved meaningfully across all three brands (Texas Roadhouse, Bubba's 33, and Jaggers), contributing to 42.5% earnings-per-share growth. Looking ahead to 2025, the company updated its commodity inflation guidance to 3%-4% (up from 2%-3%) based primarily on tighter cattle supply projections for the second half of the year, while labor inflation is expected to remain in the 4%-5% range.
4. Disciplined Development Strategy with Multiple Growth Vectors
The company maintains a measured approach to new restaurant development, with a focus on quality over quantity, while still pursuing multiple avenues for long-term growth.
For 2025, we continue to expect approximately 30 company restaurant openings across the three brands. 2025 will also benefit from the January 1 acquisition of 13 franchise restaurants in Indiana, Ohio and California.
-- Jerry Morgan, Chief Executive Officer
When asked about potentially accelerating development, Morgan emphasized quality over speed: "I'd rather be very good at opening 25, 30 restaurants on a normal basis and a good cadence with two brands." Beyond new unit development, the company is pursuing several other growth initiatives, including relocating nine high-performing Texas Roadhouse restaurants to larger sites, continuing "bump outs" at existing locations, and reaffirming their target of 900 domestic Texas Roadhouse locations.
5. Strong Financial Position Supporting Capital Allocation Priorities
The company's robust operating performance has translated to exceptional financial flexibility, allowing it to self-fund all growth initiatives while returning value to shareholders.
We ended the year with over $245 million of cash and generated over $750 million of cash flow from operations. This allowed us to once again self-fund all of our capital allocation priorities, including $354 million of capital expenditures, $163 million of dividends and $80 million of share repurchases.
-- Chris Monroe, Chief Financial Officer
Looking ahead to 2025, the company plans approximately $400 million in capital expenditures (excluding the $78 million franchise acquisition completed in January). Additionally, the board approved an 11% increase to the quarterly dividend and authorized a new $500 million share repurchase program. The company's ability to generate strong cash flows while maintaining a debt-free balance sheet provides significant flexibility to navigate challenges while continuing to invest in growth.
NASDAQ: TXRH
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Looking Ahead: Building on Three Decades of Success
Texas Roadhouse's management expressed cautious optimism for 2025, with Morgan noting "our restaurants are fully staffed, our food is legendary, and our menu is screaming value." With everyday value, operational excellence, and measured expansion as competitive advantages, the company appears well-positioned to continue driving traffic growth and unit-level profitability.
Management remains focused on fresh, made-from-scratch food, high-level hospitality, and value-oriented pricing. Key areas to watch include consumer response to modest price increases, commodity cost trends in the back half of 2025, and the performance of technology initiatives aimed at improving kitchen efficiency and guest management.
As Morgan emphasized, "We will uphold our core values of passion, partnership, integrity and fun with purpose in order to continue providing high-level hospitality to our guests, and staying true to our mission and values will lead us to delivering on our purpose of serving communities across America and the world."
