Texas Roadhouse Earnings: Strong Traffic and To-Go Sales Offset Inflation Pressures
- Hardik Shah
- 1 minute ago
- 4 min read
TLDR
Revenue Strength: Revenue rose 12.8% YoY to $1.44 billion, driven by 6.1% same-store sales growth and solid to-go demand.
Margin Trends: Restaurant margins contracted 168 basis points to 14.3% due to 7.9% commodity inflation and 3.9% labor inflation.
Forward Outlook: Management guided to 5–6% store week growth in 2026 and remains focused on balancing value, disciplined pricing, and expansion across brands.
Business Overview
Texas Roadhouse, Inc. operates over 800 casual dining restaurants under three brands — Texas Roadhouse, Bubba’s 33, and Jaggers — across 49 U.S. states and 10 international markets. Known for its “people-first” culture and made-from-scratch menu, the company continues to deliver affordable steakhouse experiences while expanding through both company-owned and franchised stores.
Texas Roadhouse Earnings
Topline Performance: For the quarter ended September 30, 2025, total revenue climbed 12.8% year-over-year to $1.44 billion, supported by 6.1% same-store sales growth and 6.8% store week expansion. Average weekly sales per restaurant rose to $157,325, with $21,409 from to-go orders, underscoring continued off-premise strength.
Profitability: Net income fell 1.5% YoY to $83.2 million, while diluted EPS slipped 0.8% to $1.25. Restaurant margin dollars rose 1.1% to $204.3 million, but margin percentage declined to 14.3% due to commodity and wage inflation outpacing menu pricing actions.
Inflation Impact: Beef prices exceeded expectations in the quarter, prompting an upward revision to full-year commodity inflation guidance to 6%. Wage inflation held steady at ~4%, supported by disciplined labor hours growing at only 35% of traffic growth.
Forward Guidance
Management reaffirmed positive same-store sales growth through 2025 and expects continued momentum into 2026 with 5–6% store week growth.Initial 2026 guidance includes:
Commodity inflation: ~7%
Labor inflation: 3–4%
Tax rate: ~15%
CapEx: ~$400 million, focused on new builds and maintenance.
CEO Jerry Morgan emphasized, “Our operators continued to drive strong traffic this quarter, which helped offset the impact of continued commodity inflation. While the duration of these inflationary pressures remains uncertain, we are committed to maintaining our value proposition and long-term focus”.
Operational Performance
Brand-Level Trends:
Texas Roadhouse: Weekly sales averaged $162,000, up 5.5%.
Bubba’s 33: Weekly sales reached $119,000, up modestly YoY despite competitive headwinds.
Jaggers: Surpassed $75,000 per week as digital kitchen rollout nears completion.The company opened seven new company restaurants (four Roadhouse, two Bubba’s 33, one Jaggers) and two international franchise units in Q3.
Margin Execution: Restaurant-level operating costs rose faster than sales, with food and beverage costs up 224 bps to 35.8% of sales, reflecting record beef prices. However, labor efficiency and G&A control—down 1.4% YoY—helped mitigate the impact.
Market Insights
The company sees broad-based guest strength across income cohorts, regions, and dayparts. Despite a 1.7% menu price increase in early Q4, no negative traffic impact was observed. Management attributed this resilience to a strong value proposition and loyal customer base.
TXRH is also leveraging beverage innovation to engage younger consumers. “The guest is responding positively to our newer offerings,” noted Morgan, highlighting mocktails, $5 all-day drink specials, and regionally tailored drinks like “dirty sodas” tested in Utah and Idaho.
Consumer Behavior & Sentiment
Customer mix continues to favor steaks and larger entrée portions, reinforcing Texas Roadhouse’s core positioning amid elevated grocery beef prices. Management observed guests “recognizing the value of our steak offerings relative to what they can do at home,” suggesting a trade-up from retail to restaurant dining.
To-go sales remained robust at 13.6% of total weekly sales, supported by faster order throughput and accuracy improvements from digital systems.
Strategic Initiatives
Expansion: ~30 new openings expected in 2025 and ~35 in 2026, including 20 Texas Roadhouse, 10 Bubba’s 33, and up to 5 Jaggers.
Franchise Acquisitions: Acquired 20 domestic franchises YTD; five California franchises set for early 2026.
Technology: 95% of restaurants now equipped with a digital kitchen and guest management system, improving speed, table turns, and guest satisfaction.
Retail Expansion: “Texas Roadhouse Inspired” mini rolls, buttery spreads, and sauces now appear in over 120,000 retail outlets, enhancing brand awareness beyond restaurants.
Capital Allocation
In Q3, Texas Roadhouse deployed $128.9 million in CapEx, $45.1 million in dividends, and $40 million in share repurchases.The Board declared a $0.68 quarterly dividend, payable December 30, 2025, marking an 11% YoY increase.Cash flow from operations reached $509 million YTD, reinforcing a strong balance sheet with $108 million in cash and no long-term debt concerns.
The Bottom Line
Texas Roadhouse’s Q3 results demonstrate the brand’s pricing power, operational consistency, and customer loyalty even amid inflation headwinds.
Three key takeaways for investors:
Volume Resilience: Traffic growth and to-go momentum show consumers view TXRH as a value leader in casual dining.
Inflation Watch: Beef costs remain a key wildcard for 2026, with management taking a measured pricing approach.
Expansion Runway: Strong development pipeline and franchise acquisitions underpin sustainable mid-single-digit unit growth.
At ~$1.25 EPS for the quarter and a robust dividend yield, TXRH remains a steady compounder in the restaurant sector, balancing growth and shareholder returns.
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