Texas Roadhouse's traffic growth continues to defy industry trends

Texas Roadhouse continued to defy broader industry trends, reporting an 8.5% increase in same-store sales at company-owned restaurants in the third quarter, including traffic growth of more than 5%.

This consistent outperformance comes as many of its peers in the casual dining segment are struggling with traffic and sales erosion. During the company’s post-market earnings call on Thursday, CEO Jerry Morgan said these results come from the chain’s operational excellence, focus, environment and food.

“We’re doing all the things great restaurants do; greeting people, feeding people, thanking them… We’re doubling down on everything we do,” he said. “We’re focused on food, service and community partnerships… It’s just a continuation of what operators have always done, and we’re rewarded for it.”

Average weekly sales at the company’s restaurants were $149,176, of which $18,914 were to-go sales, compared to average weekly sales of $138,668 in the prior year, of which $17,058 were to-go sales. Restaurant margin dollars increased 24.1% to $202.1 million from $162.8 million in the prior year due to higher sales. Restaurant margin also increased from 14.6% to 16% due to increased sales.

Revenues totaled $1.3 billion for the quarter, allowing the company to easily surpass the $5 billion mark this year. According to Technomic data, the company completed 2023 with $4.8 billion.

Texas Roadhouse achieved a 0.9% price increase during the quarter; Morgan said this was an appropriate level to maintain the value proposition.

On the technology side, the company has completed more than 200 digital kitchen conversions and expects 250 to be converted by the end of the year and the entire 770-unit system to be completed by the end of 2025.

Finance chief Chris Monroe said he was “particularly encouraged” that all three brands, including Jaggers and Bubba’s 33, delivered positive traffic and sales growth, adding that the momentum had continued so far in the fourth quarter. Shopping sales at the company’s restaurants increased 8.3% in the first four weeks of Q4 compared to 2023.

In particular, Texas Roadhouse appeared to be surprisingly negatively impacted by lower-than-forecast beef prices, and Monroe said there was a “positive outlook” for commodities and labor inflation. Additionally, hours-of-hours growth relative to traffic growth remains below the company’s historical levels of 50%, and that metric has improved for five consecutive months, Monroe said.

Additionally, Texas Roadhouse continues to have a positive mix of entrees, soft drinks and add-ons despite a 0.9% price increase, while alcohol sales remain negative but stable.

“We are getting good results from our guests, we have not heard any feedback we have received on menu pricing. I believe we still scream value,” Monroe said.

Remarkably, restaurants were impacted by recent hurricanes, but Monroe said these stores were able to quickly reopen and recover. On a monthly basis, comparable sales increased by 8%, 8.1% and 9.3% in July, August and September, respectively, while an increase of 8.3% was seen in the first four weeks of October. A key factor in this recovery is Texas Roadhouse’s focus on local store marketing rather than national marketing.

“We try to take care of the communities we’re in,” Monroe said. “If competition enters the market, our operators are not waiting for us to come in with a program, they are competing in that community every day.”

Purchasing franchise restaurants

Texas Roadhouse will purchase 13 franchised restaurants, seven in Indiana and Ohio and six in California, in early 2025 using cash on hand. Michael Bailen, head of investor relations, said the acquisition would lead to volume increases and a slight increase in margin dollars.

Morgan added that such acquisitions have been part of the company’s plan for the past 20-plus years.

“This is a very exciting transaction for us and we will continue to talk to others there,” he said.

Texas Roadhouse Q3 by the Numbers

Total revenue: $1.27 billion, up 13.5% from $1.12 billion a year ago

Net income: $84.4 million compared to $63.7 million

Comp store sales increased by 8.5% in company restaurants and 7.2% in domestic franchise restaurants

Average weekly sales at company restaurants were $149,176, of which $18,914 were to-go sales, compared to average weekly sales of $138,668 in the prior year, of which $17,058 were to-go sales.

Restaurant margin dollars increased 24.1% to $202.1 million from $162.8 million in the prior year due to higher sales. Restaurant margin as a percentage of restaurant and other sales increased from 14.6% to 16% in the previous year, driven by higher sales.

Seven company restaurants and three franchise restaurants opened

Capital allocation expenditures include capital expenditures of $91.1 million, dividends of $40.7 million and common stock repurchases of $9.6 million.

Contact Alicia Kelso (email protected)