Texas Roadhouse, Inc. (TXRH) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call presents a mixed outlook. While there are positive elements such as a strategic expansion plan and conservative pricing strategy, there are also concerns about commodity inflation, labor costs, and margin pressures. The Q&A highlights uncertainties like beef inflation and unclear timelines for new initiatives. The absence of a market cap suggests caution. Overall, the positives and negatives seem to balance each other out, leading to a neutral sentiment.
Key Financial Performance
Revenue Revenue grew to nearly $5.9 billion in 2025, driven by positive sales and traffic growth across all three brands.
Same-store sales Increased 4.9% for the full year, including 2.8% traffic growth. The growth reflects strong customer engagement and operational performance.
Consolidated average unit volume Exceeded $8.4 million, with average weekly sales of over $166,000 at Texas Roadhouse, $122,000 at Bubba's 33, and nearly $73,000 at Jaggers.
Cash flow from operations Over $730 million for the full year, enabling funding of $388 million in capital expenditures, $108 million for franchise acquisitions, and $330 million returned to shareholders through dividends and share repurchases.
Restaurant margin dollars Decreased 15.6% to $205 million in Q4 2025, impacted by commodity inflation and lapping an additional week in the prior year.
Diluted earnings per share Decreased 26.1% to $1.28 in Q4 2025, reflecting cost pressures and the absence of an additional week compared to the prior year.
Commodity inflation 9.5% in Q4 2025, leading to higher food and beverage costs as a percentage of total sales.
Labor costs Labor as a percentage of total sales increased 18 basis points to 33.2% in Q4 2025, driven by wage and other labor inflation of 2.9% and growth in hours of 1.4%.
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Operating Highlights
Digital kitchen and guest management systems: Completed rollout and upgraded systems in late 2025, with plans for further integration in 2026.
Handheld tablet testing: Expanding testing of handheld tablets for servers to input guest orders at the table in 2026.
Menu pricing: Implementing a 1.9% menu price increase in Q2 2026.
New restaurant openings: Added 48 restaurants in 2025, including 28 new company-owned stores and 20 franchise acquisitions. Franchise partners opened 4 additional restaurants, including 3 international Texas Roadhouses.
2026 expansion plans: Plan to open 35 company-owned restaurants and 10 franchise locations (6 international Texas Roadhouses and 4 domestic Jaggers).
Franchise acquisitions: Acquired 20 franchise locations in 2025 for $108 million and 5 California franchise locations in early 2026 for $72 million.
Revenue growth: Achieved nearly $5.9 billion in revenue for 2025, with 4.9% same-store sales growth and 2.8% traffic growth.
Cash flow and expenditures: Generated $730 million in cash flow, spent $388 million on capital expenditures, and returned $330 million to shareholders through dividends and share repurchases.
Commodity and labor inflation: Guided 7% commodity inflation and 3%-4% labor inflation for 2026, with beef inflation as a major driver.
Focus on hospitality and value: Reaffirmed commitment to legendary food, service, and value as core strategy.
Capital allocation: Prioritized new restaurant development and maintenance of existing locations, with $400 million allocated for capital expenditures in 2026.
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Risk or Challenges
Commodity Inflation: Commodity inflation, particularly beef inflation, is expected to remain a significant headwind in 2026, with an overall commodity inflation guidance of approximately 7%. This could impact profit margins and operational costs.
Labor Inflation: Wage and other labor inflation are projected to be 3% to 4% in 2026, with state-mandated increases and rising costs for insurance and employee benefits adding further pressure on operational expenses.
Restaurant Margin Decline: Restaurant margin as a percentage of total sales decreased by 309 basis points year-over-year to 13.9% in Q4 2025, driven by higher commodity and labor costs, which could challenge profitability.
Insurance Cost Increases: General liability insurance costs increased, with a $3.5 million additional expense in Q4 2025 compared to $2.7 million in the prior year, adding to operational cost pressures.
Impact of Lapping Additional Week: The absence of an additional week in Q4 2025 negatively impacted revenue growth by approximately 9% and earnings growth by approximately 12%, highlighting a challenge in maintaining year-over-year growth comparisons.
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Guidance & Outlook
Company Restaurant Openings: For 2026, the company expects approximately 35 company restaurant openings across its three brands.
Franchise Development: The company expects to open 6 international Texas Roadhouses and 4 domestic Jaggers in 2026.
Menu Pricing: A 1.9% menu price increase will be implemented at the beginning of the second quarter of 2026.
Technology Integration: In 2026, the company will continue integrating enhanced digital kitchen and guest management systems and expand testing of handheld tablets for servers.
Commodity Inflation: Guidance for commodity inflation in 2026 is approximately 7%, with higher inflation expected in the first half of the year and lower inflation in the second half. Beef inflation accounts for nearly all of the expected inflation.
Labor Inflation: Wage and other labor inflation for 2026 is expected to be 3% to 4%, with wage inflation moderating despite state-mandated increases, while insurance and employee benefits costs are expected to trend higher.
Capital Expenditures: Capital expenditure guidance for 2026 is approximately $400 million, excluding $72 million for the acquisition of 5 California franchise locations.
Dividend Increase: The company announced a 10% increase to its quarterly dividend, bringing it to $0.75 per quarter.
Income Tax Rate: The full-year 2026 income tax rate is forecasted to be between 14% and 15%.
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Shareholder Return Plan
Dividends returned to shareholders: $180 million returned to shareholders through dividends in 2025
Quarterly dividend increase: 10% increase to quarterly dividend, now $0.75 per quarter
Share repurchases: $150 million in share repurchases in 2025
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Key Q&A
Q:What impact did the sales slowdown in December have on earnings, and how did labor hours ratio change?
A:The labor hours ratio was 68% in December, up from sub-50% in October and November. The slowdown in December, caused by holiday shifts and weather, was an anomaly. In the first quarter, the ratio returned to sub-40%.
Q:What is the outlook for beef inflation and strategies to offset it?
A:Beef inflation will remain a pressure in 2026, with herd expansion unlikely before late 2027. The company focuses on growing the top line to leverage labor and other operating costs.
Q:What was the impact of weather on the quarter-to-date performance?
A:Weather had a 2.5% negative impact on the first 7 weeks, offset partially by lapping weather from last year, resulting in a net 1.5% negative impact.
Q:How does the digital kitchen rollout impact operations and future plans?
A:The digital kitchen creates a calmer environment and allows for more to-go business. However, it will not lead to delivery service at this time.
Q:What was the pricing for the fourth quarter and expectations for 2026?
A:Pricing was 3.1% for the fourth quarter and will remain the same in the first quarter of 2026. With a 1.9% increase rolling on, pricing will be 3.6% in the second and third quarters.
Q:How does the company view its pricing strategy in relation to competitors?
A:The company maintains conservative pricing, staying below the competitive set, focusing on value and guest experience.
Q:What is the impact of tax refunds on restaurant performance?
A:Tax refunds can be a tailwind, potentially leading to increased transactions or higher attachments, depending on the size and timing of refunds.
Q:What was the calendar impact on Q4 and Q1 performance?
A:Calendar shifts, including Christmas and New Year's Eve, had a 1% negative impact on Q4 and a 1% positive impact on the first 7 weeks of Q1.
Q:What is driving the recent acceleration in traffic trends?
A:The acceleration is attributed to high-level operations, great guest experiences, and employee satisfaction.
Q:What is the outlook for commodity inflation in 2026?
A:Commodity inflation is expected to be above 7% in the first half of 2026, with Q2 being the highest at high single digits, and then easing in the back half of the year.
Q:What is the status of handheld ordering tests and G&A guidance?
A:Handheld ordering tests are ongoing, with software tweaks being made. G&A is expected to increase in low double digits, driven by new equity grants and higher incentive compensation.
Q:What is the outlook for restaurant-level margins in 2026?
A:Margins may remain under pressure due to commodity inflation, but margin dollars are expected to increase.
Q:What is the long-term outlook for the Bubba's brand?
A:Bubba's is expected to grow, with 10 new units planned for 2026. The brand is positioned well within its competitive set and is expected to add value to the company.
Q:What is the impact of product mix on COGS and check dynamics?
A:Product mix pressure on COGS has eased, with alcohol mix improving. To-go business growth, which has a lower average check, continues to pressure mix.
Q:What is the company's view on traffic share gains and consumer behavior?
A:The company attributes traffic gains to quality food, great value, and high-level hospitality, resonating with consumers seeking value.
Q:What is the breakdown of G&A guidance and long-term expectations?
A:G&A increases are driven by new equity grants and higher incentive compensation. G&A as a percentage of sales is expected to remain consistent with recent years.
Q:What is the status of guest management software and its impact?
A:The software improves table management, wait time accuracy, and overall efficiency, contributing to better guest experiences.
Q:What is the outlook for beef inflation and potential demand destruction?
A:Beef inflation remains a concern, but demand destruction at retail could potentially ease inflation as consumers trade to other proteins.
Q:What is the status of build cost inflation and company-franchise mix?
A:Build costs for Roadhouse are increasing to $8.9M, while Bubba's costs are decreasing to $8.5M. The company-franchise mix is shifting towards more company-owned units, with no specific target disclosed.
Q:What is the outlook for labor inflation in 2026?
A:Labor inflation is expected to stabilize, with wage components trending down but other costs like insurance potentially increasing.
Q:How does the company view its pricing strategy and consumer feedback?
A:The company remains conservative with pricing, staying below competitors, and continues to focus on delivering value and high-level guest experiences.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on the potential impact of demand destruction on beef inflation, the exact timeline for handheld ordering rollout, and the long-term company-franchise mix strategy.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Accounting Financial
Bailen Vice
Beef inflation
Bubba Jaggers
CFO Texas
CFO transition
California franchise
Chief Accounting
Commodity
Financial Services
Lenihan
Louisville
Roadhouse journey
Roadhouses Jaggers
Services Officer
Texas Roadhouse
Texas Roadhouses
acquisition California
acquisition franchise
approach
benefit week
cash flow
cost pressure
decline
decrease
discussion result
family
franchise location
guest system
inflation wage
kitchen guest
purpose
rate income
restaurant base
restaurant franchise
rollout kitchen
sale week
support center
TXRH Transcript
Texas Roadhouse, Inc. (TXRH) Q4 2025 Earnings Call Transcript
Unknown2-19
The earnings call presents a mixed outlook. While there are positive elements such as a strategic expansion plan and conservative pricing strategy, there are also concerns about commodity inflation, labor costs, and margin pressures. The Q&A highlights uncertainties like beef inflation and unclear timelines for new initiatives. The absence of a market cap suggests caution. Overall, the positives and negatives seem to balance each other out, leading to a neutral sentiment.
Texas Roadhouse, Inc. (TXRH) Q3 2025 Earnings Call Transcript
Positive11-6
The earnings call summary and Q&A reflect a positive sentiment overall. The company reported strong comparable sales growth, effective cost management, and strategic expansion plans. Despite concerns about beef inflation, management expressed confidence in managing through the cycle. Dividend increases and share repurchases are planned, which are positive for shareholder returns. Although there are some uncertainties, such as the structural nature of beef inflation, the company's proactive strategies and optimistic guidance suggest a positive outlook for stock price movement.
Texas Roadhouse, Inc. (TXRH) Q2 2025 Earnings Call Transcript
Positive8-7
The earnings call highlights strong financial performance with revenue growth, positive guidance, and effective cost management. The company is expanding through new restaurant openings and technology initiatives, which are well-received by analysts. Despite inflationary pressures, margins are maintained, and the off-premise sales growth is sustainable. The Q&A reveals optimism about Bubba's 33 expansion and the mobile app's impact, although some details remain unclear. Overall, the positive outlook on revenue and strategic initiatives outweigh the minor concerns, predicting a positive stock price movement in the short term.
Texas Roadhouse, Inc. (NASDAQ:TXRH) Q1 2025 Earnings Call Transcript
Unknown5-9
The earnings call revealed several concerning factors: an EPS miss, increased guidance for commodity inflation, and a decline in restaurant margins. Despite a revenue increase, these negative aspects overshadowed positive elements like cash flow and comparable sales growth. The Q&A section highlighted uncertainties in labor costs and commodity prices, further weighing on sentiment. Share repurchases and dividends were maintained, but not enough to offset negative financial indicators. Given these mixed signals and lack of a strong positive catalyst, the stock price is likely to experience a negative reaction in the short term.
TXRH Report
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