Texas Roadhouse Inc. (NASDAQ: TXRH) continues its impressive growth trajectory, delivering stellar Q4 2024 results and outlining ambitious expansion plans for 2025. With revenue nearing $5.4 billion and average unit volumes surpassing $8 million, the company is reinforcing its market leadership through consistent operational excellence and strategic growth initiatives.
Q4 2024 Performance Highlights
CEO Jerry Morgan celebrated another milestone year, emphasizing Texas Roadhouse’s second consecutive year of double-digit growth in key financial metrics, including restaurant margin dollars, income from operations, and earnings per share. The company opened 31 company-owned restaurants and 11 international franchise locations in 2024, with plans for continued expansion in the upcoming year.
Full-year same-store sales increased by 8.5%, driven by a notable 4.4% rise in traffic. CFO Chris Monroe reported that cash flow from operations reached $750 million, allowing for $354 million in capital expenditures, $163 million in dividends, and $80 million in share repurchases. Additionally, the company announced an 11% dividend increase and a $500 million share repurchase program.
Strategic Plans for 2025
Looking ahead, Texas Roadhouse aims to open approximately 30 company-owned locations, including 13 franchise acquisitions, as well as seven international Texas Roadhouse outlets and three domestic Jaggers restaurants.
A 1.4% menu price increase will be introduced in Q2 2025 to maintain the brand’s value positioning. Other strategic initiatives include the rollout of new mocktails and the enhancement of digital kitchen systems, designed to improve guest experience and operational efficiency.
Financial and Operational Outlook
- Comparable Sales: First seven weeks of Q1 2025 showed 2.9% growth, despite adverse weather conditions and calendar shifts.
- Labor and Commodity Inflation: Wage and labor costs are expected to rise 4%-5%, with state-mandated wage increases contributing up to 1.5%. Commodity inflation projections have been revised to 3%-4%, influenced by tighter cattle supply.
- Capital Expenditures: Budgeted at approximately $400 million for 2025, excluding the $78 million allocated for franchise acquisitions.
Earnings Breakdown and Key Metrics
- Q4 2024 Revenue Growth: 23.5% increase year-over-year, fueled by a 6.6% rise in average unit volumes and a 13.7% increase in store week growth.
- Comparable Sales Growth: 7.7% in Q4, supported by a 4.9% increase in traffic and a 2.8% rise in average check.
- Restaurant Margin Performance: Improved by 172 basis points to 17%, reflecting pricing benefits and cost management.
- To-Go Sales Contribution: Averaged $20,000 weekly, accounting for 13% of total weekly sales.
- Earnings Per Share (EPS): Increased 60.1% to $1.73, with an extra 14th week in the quarter adding over 20% to EPS growth.
Key Analyst Insights & Investor Sentiment
During the earnings call, analysts inquired about comp sales trends, labor costs, and the impact of inflation. While there were concerns about wage pressures and beef supply constraints, CEO Jerry Morgan remained confident in the company’s strong guest demand and strategic pricing approach.
- David Tarantino (Baird): Asked about weather-related sales impact. Management acknowledged a 1.5% negative effect but reaffirmed their confidence in sustained momentum.
- Sara Senatore (Bank of America): Explored menu mix changes and mocktail performance. The company reported a 0.3% pricing benefit, with mocktails still in the early adoption phase.
- Brian Harbour (Morgan Stanley): Inquired about labor hours and operational efficiency. Management emphasized the impact of labor inflation but highlighted productivity gains through workforce optimization.
Market Risks & Challenges
- Weather Disruptions: Q1 2025 sales trends were affected by calendar shifts and extreme weather conditions.
- Rising Commodity Costs: Increasing cattle prices and commodity inflation could impact restaurant margins in the latter half of 2025.
- Labor Inflation: State-mandated wage hikes and healthcare expenses may pressure profitability.
Steady Growth Amid Challenges
Despite inflationary pressures and external challenges, Texas Roadhouse remains focused on driving sustained growth through strategic restaurant openings, technology investments, and operational efficiencies. The company’s ability to maintain traffic growth and pricing power underscores its resilience in a dynamic economic environment. With strong cash flow generation and an expanded share repurchase program, Texas Roadhouse continues to position itself for long-term success.
