LOUISVILLE Ky. Amid general market gains on Tuesday, Texas Roadhouse Inc. stock fell 5.6 percent after the casual-dining operator reported a 15-percent drop in fourth-quarter profit late Monday, and also said it would not yet raise menu prices.
The move to halt price hikes, according to some observers, may reflect further erosion in guest traffic among price-sensitive consumers who typically frequent lower-priced dinnerhouses like Texas Roadhouse.
Texas Roadhouse stock fell to $7.98 per share on Tuesday, down 5.6 percent from the day before.
Some securities analysts that follow the operator of about 300 restaurants had said they expected Texas Roadhouse to raise menu prices this month after previously testing price hikes between 2 percent and 5 percent. The move would have driven sales gains and offset costs, especially labor expenses related to the company’s bonus plan for managing partners, which will cost an incremental $1.5 million in 2009.
The company, which is a value-focused dinnerhouse that boasts 20 items under $10, said it would postpone its pricing decisions given the current economic environment.
“We just decided that given all the conditions out there economically, we currently are delaying that decision,” chief executive G.J. Hart said in a conference call, referring to the chain’s pricing decisions. “We continue to evaluate it, and you will hear from [us] soon.”
Analyst Jeff Farmer at Jefferies & Co. said the decision could indicate how bad traffic in the casual-dining sector really has become.
“Word that Texas Roadhouse has opted to pass on taking a February price increase will come as a surprise to most, and is a strong indication of (1) how competitive and price-sensitive the bar-and-grill segment is, and (2) Texas Roadhouse’s view that traffic will remain weak for the foreseeable future,” he said.
For the fourth quarter ended Dec. 30, net income totaled $6.1 million, down from earnings of $7.2 million in the same quarter a year earlier. Per-share earnings remained the same, at 9 cents, because of a reduction in the number of shares outstanding in the latest quarter.
Revenue rose 26 percent to $234.2 million, driven by six corporate restaurant openings and one restaurant acquisition from a franchisee during the quarter. Same-store sales fell 4.7 percent at corporate restaurants and 5.5 percent at franchise locations.
For the full year, Texas Roadhouse earned $38.2 million on revenues of $880.5 million. A year earlier, the company booked $39.3 million on revenues of $735.1 million. Texas Roadhouse opened 29 new restaurants in fiscal 2008. Annual same-store sales fell 2.3 percent at corporate restaurants and 3.6 percent at franchise locations.
The company also predicted flat year-to-year earnings for 2009, and said that same-store sales through the first seven weeks of the year fell 1 percent, compared with the same time frame a year earlier.
Contact Sarah Lockyer at [email protected].
