Texas Roadhouse Earnings

Restaurant company, Texas Roadhouse, Inc. (NASDAQ: TXRH), which operates in the casual dining segment, tanked over 13 percent during after-hours after the company missed both EPS and revenues during its fourth quarter. Texas Roadhouse reported EPS of $0.29 on revenues of $485 million, missing analysts’ expectations of $0.38 on revenues of $497 million. The company also raised quarterly dividend 10.5% to $0.21 per share.

Fourth quarter highlights:

  • Comparable restaurant sales growth of 1.2% at company restaurants, including a negative impact of approximately 0.5% related to the calendar shift of the Christmas holiday, and 2.0% at domestic franchise restaurants;
  • Restaurant margin, as a percentage of restaurant sales, decreased 44 basis points to 17.1%. Wage rate inflation and higher costs associated with payroll taxes, insurance reserve adjustments and gift card fees more than offset the benefit of lower food costs;
  • Restaurant margin dollars increased 4.0% to $82.4 million from $79.2 million in the prior year;
  • Diluted earnings per share decreased 10.3% to $0.29 from $0.32 in the prior year primarily due to restaurant margin performance, higher general and administrative expenses and higher depreciation costs; and
  • Nine company-owned restaurants were opened, including four Bubba’s 33 restaurants.

Kent Taylor, Chief Executive Officer of Texas Roadhouse, Inc., commented, “We are pleased to deliver another strong year of results including a 19% increase in diluted earnings per share driven by double-digit revenue growth and restaurant margin expansion. We also delivered impressive comparable restaurant sales growth during 2016 with an increase of 3.5%, and we extended our streak of consecutive quarters of comparable restaurant sales growth to 28 with our fourth quarter increase. Lastly, our strong balance sheet and healthy cash flows allowed us to return $56.2 million of excess capital to shareholders through quarterly dividend payments and share repurchases during 2016.”

2017 Outlook

Comparable restaurant sales at company restaurants for the first 55 days of our first quarter of fiscal 2017 increased approximately 1.5% compared to the prior year period.

Management updated the following expectations for 2017:

  • Approximately 30 company restaurant openings, including approximately six Bubba’s 33 restaurants;
  • Food cost deflation of approximately 1.0% to 2.0% compared to previous guidance of low-single digit food cost deflation
  • An income tax rate of 29.0% to 30.0% compared to previous guidance of 30.0% to 31.0%.

Management reiterated the following expectations for 2017:

  • Positive comparable restaurant sales growth;
  • Mid-single digit labor inflation
  • Total capital expenditures of approximately $170.0 million, excluding any cash used for franchise acquisitions.

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