The executives at Texas Roadhouse have a keen understanding of consumer health | So Good News


Texas Roadhouse reported third-quarter earnings Thursday, including an 8.2% increase in retail sales at company-owned restaurants and a 6.7% increase in domestic restaurants.

Average weekly sales at the company’s restaurants were up nearly $10,000 from last year – $129,278 versus $120,094 – and the outside business made up about 13% of those sales in Q3. Although the company has taken high rates, including 2.9% for the quarter, the performance of the vehicles remains positive, which gives a lot of hope to the management. In fact, the company’s traffic is up 10% over 2019 numbers.

“I think the consumer’s health is good. Demand continues to be strong for our brands. We’re seeing more traffic throughout the day and weekdays, so it’s all good in our opinion,” said CFO Tonya Robinson during the earnings call.

Texas Roadhouse has enjoyed 10 years of traffic growth, but now it may be cashing in on drive-thru fatigue as well. New data from Gravy Analytics found that the fast-casual category experienced foot traffic in Q3 against both casual and casual dining brands.

That said, beef prices remain a concern when it comes to meat products, but Mr. Robinson noted that there has been a decline in beef in recent quarters and said the company took in lower-than-expected prices on an earnings call earlier this year.

“I think this speaks to workers to be more comfortable with the way things are going compared to a year ago when we were dealing with a lot of uncertainty in terms of inflation, especially in terms of trade and services,” he said.

Texas Roadhouse’s menu price increases are close to a two-year low, along with many of its peers in the industry, which could make the chain even more profitable if beef prices continue, as some analysts expect.

Meanwhile, management believes the company’s expansion could result in 900 Roadhouse units, up from the current 600-plus units. CEO Jerry Morgan is very focused on development because of the success the brand has had in smaller communities.

“We are still encouraged by the performance of our new restaurants, including the opening of Texas Roadhouse, in small towns. This performance confirms that we believe that we still have the opportunity to grow for many years to come,” he said.

To meet the high volume and demand for development, Robinson said the company has “reached a point where we are comfortable with our employees.” This is an important factor because work remains tight across the industry and several companies have reduced their hours accordingly, leaving money on the table.

“We continue to have more employees based on the volumes we’re seeing. I expect it will start to return to normal in 2023 and that will be our hope,” Robinson said. “We always make sure our employees are working on the products they have, the products they want and they’re calling,” Robinson said.

After this good quarter, Texas Roadhouse management is optimistic about Q4, especially due to record gift card sales. Management is also optimistic about 2023, despite forecasts that the economy will slow.

“As we head into November and the gift card season, we’re doing really well and that will continue as we push through gift card sales,” Morgan said. “We are ready to continue to do what consumers want and I think they will reward us for that.”

That said, if consumer woes continue into 2023, Texas Roadhouse management believes the company is in good shape. Robinson points to the Great Recession of 2008-09, when the chain dominated the casual dining segment.

“The value that we have in food is very profitable and the main thing for us that we focus on is that, following (the recession), we made 10 years of increased traffic,” he said. “So, we know that consistency is very important.”

Morgan added that the most important thing for the company in the midst of such volatility is the ability to adjust volumes.

“We haven’t changed the portion sizes, we haven’t lost focus on the food or the service or the experience,” he said. “In difficult times, you change, but you keep your promises.”

Contact Alicia at [email protected]

Find him on Twitter: @BGbunster


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