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Texas Roadhouse Photo courtesy of Sam Faurest
Texas Roadhouse's restaurant-level margins exceeded 17% in Q1.

Texas Roadhouse is seeing no behavior changes from consumers

The restaurant experienced over 4% traffic growth during the quarter in which most of its peers experienced a more cautious consumer.

Texas Roadhouse recently held its annual managing partner conference in which this year’s theme was unveiled. After learning the company’s Q1 results Thursday afternoon, that theme – “Buckle Up” – seems especially fitting.

The company turned in $1.32 billion in revenues for the quarter, a 12.5% year-over-year increase. Comp store sales were up 8.4% at company-owned restaurants driven by 4.3% traffic growth and a 4.1% increase in check. Franchised locations were up 7.7%.

Average weekly sales at company restaurants jumped to $159,378, of which $20,815 were to-go sales, compared to $148,437 and $19,030 a year ago. Restaurant-level margins increased to 17.4% from 15.9% last year. Finally, nine company restaurants and three franchised restaurants were opened during the quarter, en route to about 30 expected for the full year.

With those numbers as a backdrop, it’s safe to say Texas Roadhouse had an anomalous quarter compared to much of the industry. After several rounds of earnings calls across segments, we’ve repeatedly heard about a more discerning consumer, and we’ve seen that backed up with traffic declines. That is not the case at Texas Roadhouse.

“We’re not seeing anything changing in consumer behavior,” Michael Bailen, head of investor relations, said during the call. “We are seeing less alcohol and that has been trending more to neutral over the last several months. But entrees, appetizers, add-ons, all of those things have flattened out, so we’re very encouraged by what we’re seeing. It shows that the consumer is still seeing the everyday value we’re offering.”

That value, CEO Jerry Morgan added, is built into the menu, even after a 2.2% pricing increase recently mixed in.

“We believe our offerings is what is allowing customers to be happy when they do trade in from wherever,” he said. “Our focus on the food, experience, and service, with value built into the menu is what we’re seeing. I don’t see anything except to keep doing what we’re doing.”

Mix trends improved as we moved through the first quarter and into the second quarter,” CFO Chris Monroe added. “We’ve always taken a long-term approach to pricing with goal of driving sustainable growth and we believe guests continue to reward us for that.”

Aside from that value proposition, Texas Roadhouse’s quarter also benefited from technology initiatives, more robust staffing levels and favorable beef costs, which were “better than expected,” according to Monroe. On the tech side, the company has approximately 30% of its approximately 200 digital kitchen conversions complete and executives said the feedback thus far has been positive.

“In addition to creating efficiencies, operators also appreciate the calmer kitchen and less stressful environment,” Morgan said about the digital kitchen system. “We are able to see cook times and the timing of the food. And the calmness and organization it brings to the back of house – we believe that quality of life or experience on the job will benefit us as we move forward.”

In Q2, the company will roll out a new people system, called Roadie First, that provides employees with a platform for easier access to their data and records. Morgan said it should also improve management processes and recruitment.

“The name ‘Roadie First’ reflects our commitment to enhancing the Roadie experience at all levels,” he said.

Additionally, Roadhouse Pay, or pay at the table, is used by approximately 80% of the chain’s dine-in guests. Morgan said it adds a convenience factor and “has been very well liked and utilized.”

Meanwhile, staffing and tenure levels have improved from hiring efforts put into place last year.

“This allows our operators to have a team that’s working together, has reps together, and it’s just more efficient,” Monroe said. “We are far away from the situations during the pandemic where it was difficult to get staffing. Now our turnover is much lower and that’s driving some of the benefit on that (labor) line.”

One final note from the earnings call: In addition to its “Buckle Up” theme, the company introduced its first purpose statement at that recent managing partner conference, which is: “Serving communities across America and the world.” Having this statement in place “builds clarity for Roadies and will inspire them for the journey ahead,” Morgan said.

That said, during Texas Roadhouse’s last quarterly earnings call in February, CEO Jerry Morgan summed up the chain’s performance with an enthusiastic “yeehaw.” This time around, it was an emphatic, “Let’s go.”

Contact Alicia Kelso at [email protected]

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