Texas Roadhouse on Thursday night reported a disappointing first quarter, with inclement climate dragging down comparable retailer gross sales. Nevertheless, early indicators of a stronger second quarter have been giving traders hope, nudging the inventory modestly increased in after-hours buying and selling. Income within the quarter ended April 1 elevated 9.6% 12 months over 12 months to $1.45 billion, exceeding the LSEG-complied Wall Avenue consensus estimate of $1.44 billion. Earnings per share elevated 1% to $1.70, lacking the $1.76 anticipated. TXRH YTD mountain Texas Roadhouse YTD Backside Line As soon as once more, the Texas Roadhouse outcomes have been a story of two halves. The corporate entered 2025 with tons of momentum and excessive single-digit comparable retailer gross sales, or comps, pushed by a wholesome mix of visitors and common examine progress. This power continued via January with comparable gross sales up 5.5%. Nevertheless, the corporate navigated via a big slowdown in February as wet, snowy, and chilly climate saved folks indoors and away from eating places, resulting in comp gross sales progress of simply 0.5%. Texas Roadhouse’s traits improved as the primary quarter progressed, with March comps growing to 4.6%. But when we take the total three-month interval collectively, comparable retailer gross sales progress slowed to three.5%, pushed by a 1.1% improve in visitors progress and a 2.4% improve in common examine. It will not be the excessive single-digit progress Texas Roadhouse traders have been accustomed to, but it surely was nonetheless slightly higher than the three.1% consensus estimate, based on Bloomberg. All three manufacturers delivered constructive comps and tariff progress throughout the quarter. Along with Texas Roadhouse, the corporate owns the informal eating chains Bubba’s 33 and Jaggers. Wanting ahead, we have been inspired to study that top-line traits returned to normalized ranges in March, April, and Might. In reality, the corporate identified that its common weekly gross sales for March hit all-time highs in any respect three manufacturers. By means of the primary 5 weeks of the second quarter, Texas Roadhouse stated its comparable gross sales at firm eating places elevated 5% 12 months over 12 months. This places the corporate on tempo to exceed the second quarter consensus estimate of 4.28%, based on Bloomberg. The corporate’s quarter-to-date disclosure ought to assist ease some investor issues about how the unsure macroenvironment could damage restaurant gross sales and pressure folks to commerce right down to different choices or prepare dinner extra at residence. In some ways, this replace holds extra weight with traders than the reported outcomes, explaining why the shares have been increased regardless of the earnings miss. Nevertheless, the rise within the full 12 months commodity value inflation outlook should not be ignored both. These increased anticipated prices will squeeze margins slightly bit for the remainder of the 12 months. Our takeaway from the night is that the March rebound and power via April present that Texas Roadhouse is a liked restaurant chain due to the worth and enjoyable expertise it gives its clients. Its model retains them properly geared up to deal with any unfavorable twists and turns within the financial system and shopper spending. For that motive, we’re reiterating our 1 score. Nevertheless, in recognition of commodity inflation driving margin strain, we’re lowering our worth goal to $195 per share from $205. Commentary Texas Roadhouse opened eight firm eating places within the quarter, seven of which have been below the namesake model. The opposite one was a Bubba’s 33, which marked that chain’s fiftieth location. With one other 15 eating places already open or below development, the corporate is on observe to open 30 company-owned eating places this 12 months. Administration spent $78.3 million shopping for 14 Texas Roadhouse franchises. They plan to accumulate one other three eating places within the second quarter. It is a good use of money as a result of bringing franchise places below the company umbrella offers the corporate extra management over every thing in its eating places and sometimes result in higher working outcomes. Texas Roadhouse has applied a number of initiatives to reinforce the effectivity of its eating places. One such effort is the rollout of a digital kitchen system, designed to streamline kitchen operations and cut back stress for employees. Round 65% of the corporate’s places have already adopted the system, with the remaining places anticipated to make the transition by 12 months’s finish. Moreover, the corporate has superior its visitor administration system, enabling operators to supply extra correct wait instances and optimize flooring plan administration. As for money returns to shareholders, the corporate purchased again $50.2 million price of inventory within the quarter. That is about one-tenth of the $500 million share repurchase program it introduced again in February. It additionally represents a rise from the $35.1 million repurchase within the fourth quarter, an indication that administration is prepared to step in and purchase when the inventory is unstable. Why we personal it Texas Roadhouse is a fast-casual steak chin that provides high quality meals at an reasonably priced worth in a enjoyable environment, creating one of many extra compelling worth propositions for shoppers within the full-service eating class. A considerable majority firm’s shops are company-owned shops, with solely a small proportion as franchise places. Opponents: Darden (Olive Backyard, LongHorn Steakhouse), Brinker (Chili’s and Maggiano’s), Bloomin Manufacturers (Outback, Carrabbas Italian Grill, BonefishGrill) Portfolio weighting: 2.8% Most up-to-date purchase: April 9, 2025 Initiated: Feb. 4, 2025 Steerage As talked about earlier, Texas Roadhouse comparable gross sales at firm eating places elevated 5% 12 months over 12 months via the primary 5 weeks of the second quarter. The elevated comps have been pushed by 3.1% visitors progress and a 1.9% improve in pricing. These gross sales acquired a lift from a menu worth improve of roughly 1.4% in early April, which is one thing administration beforehand stated they’d do. The corporate additionally known as out enchancment in combine (objects bought) traits, particularly within the entree and appetizer classes. Apparently, the corporate noticed some extra company commerce up from a rooster or seafood entree into steak. Alcohol gross sales are negatively impacting combine by slightly over half of a proportion level. Administration has been including mocktails as a method to enhance combine of upper margin objects. For 2025, administration reaffirmed most of its outlook. On what did not change, administration nonetheless expects full-year constructive comparable gross sales progress, retailer week progress of 5%, wage and different labor inflation of 4% to five%, whole capital expenditures of $400 million, and an efficient tax fee of 15% to 16%. On what did change, the corporate raised its commodity value inflation outlook to roughly 4%, which is the excessive finish of its earlier steering of three% to 4%. For some perspective, when the corporate first gave a 2025 outlook final October, it stated it anticipated commodity value inflation of two% to three%. However that was raised final quarter, primarily resulting from an replace on cattle provide expectations. The corporate’s margins are extremely delicate to beef costs. The up to date commodity value inflation outlook was resulting from a rise in beef prices anticipated for the remainder of the 12 months and a 30-basis-point full-year influence from tariffs. On tariffs, seafood is essentially the most impacted portion of its commodity basket since Texas Roadhouse buys most of this class from nations that do not fall below the 2020 United States-Mexico-Canada Settlement. Outdoors of seafood, the corporate stated there are not any different important elements of its commodity basket bought outdoors North America. Tariffs are additionally anticipated to have an effect on different objects, together with provides like disposable and flatware. Unplanned tools substitute could possibly be impacted by tariffs, too. (Jim Cramer’s Charitable Belief is lengthy TXRH. See right here for a full record of the shares.) 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A lady enters a Texas Roadhouse restaurant in Arvada, Colorado, on Friday, March 11, 2011.
Matthew Staver | Bloomberg | Getty Pictures
Texas Roadhouse on Thursday night reported a disappointing first quarter, with inclement climate dragging down comparable retailer gross sales. Nevertheless, early indicators of a stronger second quarter have been giving traders hope, nudging the inventory modestly increased in after-hours buying and selling.
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