Texas Roadhouse Inc. sales continued to surge in the third quarter ended Sept. 29, but restaurant margins fell during the period as higher wage rate inflation took its toll on profits, the company said Monday.
Restaurant margins fell 22 basis points in the quarter, to 16.6 percent of sales, as higher labor and health insurance costs “more than offset” higher average unit volumes.
Same-store sales increased 6.9 percent at company-owned restaurants and rose 7.7 percent at franchised locations.
“Our performance continues to be driven by our commitment to legendary food and legendary service,” Texas Roadhouse CEO Kent Taylor said in a statement.
Revenue rose 14 percent during the quarter, to $438.1 million, from $385.2 million the previous year. Net income increased 8 percent, to $20.5 million, or 29 cents per share, from $18.9 million, or 27 cents per share.
The casual-dining Texas Roadhouse chain includes 466 locations, 385 of which are company owned. The company also operates seven Bubba’s 33 locations, all but one of which has been opened this year.
Texas Roadhouse expects to finish the year with food cost inflation of 5 percent, but that is expected to reverse somewhat in 2016. The company now predicts food cost “deflation” in the low single digits next year to go along with what it calls “positive” same-store sales growth.
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