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Texas Roadhouse's is not seeing any changes in consumer behavior

Texas Roadhouse recently held its annual managing partner conference where this year's theme was introduced. After learning the company Q1 Based on the results on Thursday afternoon, this theme – “Buckle up” – seems particularly appropriate.

The company reported revenue of $1.32 billion in the quarter, up 12.5% ​​year-over-year. Comp store sales increased 8.4% at company-owned restaurants, driven by 4.3% traffic growth and a 4.1% increase in checks. Franchise locations increased 7.7%.

Average weekly sales at company restaurants increased to $159,378, of which $20,815 was to-go sales, compared to $148,437 and $19,030 a year ago. Restaurant-level margins rose to 17.4% from 15.9% a year ago. Finally, nine company restaurants and three franchise restaurants were opened during the quarter. Around 30 restaurants are expected to open for the full year.

With these numbers in mind, it's safe to say that Texas Roadhouse had an unusual quarter compared to most of the industry. After several rounds of earnings calls across all segments, we continued to hear from a more sophisticated consumer, and we saw that this was accompanied by a decline in traffic. That's not the case at Texas Roadhouse.

“We don’t see any change in consumer behavior” Michael Bailensaid Head of Investor Relations during the call. “We are seeing less alcohol and it has been trending towards neutral in recent months. But entrees, entrees, sides, all of that has flattened out, so we're very encouraged by what we're seeing. It shows that the consumer still recognizes the everyday value we offer.”

That value, added CEO Jerry Morgan, is built into the menu, even after a recent 2.2% price increase.

“We believe our offerings enable customers to be satisfied when trading from anywhere,” he said. “We see our focus on the food, the experience and the service, with value built into the menu. I don’t see anything other than continuing to do what we’re doing.”

Mix trends improved throughout the first and second quarters,” added CFO Chris Monroe. “We have always taken a long-term pricing approach with the goal of driving sustainable growth, and we believe guests will continue to reward us for this.”

Aside from that value proposition, Texas Roadhouse's district also benefited from technology initiatives, a more robust workforce and favorable beef costs that Monroe said were “better than expected.” On the tech side, the company has completed about 30% of its roughly 200 digital kitchen remodels, and executives said feedback so far has been positive.

“In addition to the increased efficiency, operators also value the quieter kitchen and less stressful environment,” Morgan said of the digital kitchen system. “We can see the cooking times and when the food is prepared. And the peace and organization that it brings to the back of the house – we think that quality of life or workplace experience will benefit us as we move forward.”

In the second quarter, the company will launch a new HR system called Roadie First, which will provide employees with a platform to more easily access their data and records. Morgan said it should also improve management processes and recruiting.

“The name 'Roadie First' reflects our commitment to improving the Roadie experience at every level,” he said.

In addition, Roadhouse Pay, i.e. payment at the table, is used by around 80% of the chain's guests. Morgan said it added a convenience factor and had been “very popular and used”.

Meanwhile, staffing levels and employment conditions have improved as a result of recruitment efforts undertaken over the last year.

“This allows our operators to have a team that works together, has common representatives and is simply more efficient,” Monroe said. “We are a long way from the situations during the pandemic where it was difficult to get staff. Now our turnover is much lower, and that’s part of the benefit in this (work) line.”

A final note on the earnings release: In addition to its “fasten your seatbelts” theme, the company unveiled its first statement of purpose at the recent executive partners' conference, which reads: “To serve communities across America and the world.” Implementing this statement “provides clarity for roadies and will inspire them for the journey ahead,” said Morgan.

However, during Texas Roadhouse's most recent quarterly earnings conference call in February, CEO Jerry Morgan summed up the chain's performance with an enthusiastic “yeah.” This time it was an emphatic “Let’s go.”

Contact Alicia Kelso at [email protected]

Anna Harden

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