One of the overarching themes in the restaurant space of late has been the intensifying value wars, as chains across segments rush to offer deals to win back a consumer set that is clearly pulling back on visits. Don’t include Texas Roadhouse in that conversation, however.
The casual dining chain showed yet again that it is immune to many of the macroeconomic challenges besieging other concepts. The company reported second quarter results Thursday after market, including a same-store sales increase of 9.3% year-over-year driven by 4.5% traffic growth and a 4.8% check increase.
“There has been significant discussion within the restaurant industry concerning the health of the consumer, as well as the increased focus on promotions and discounting from others in the industry,” CEO Jerry Morgan said during the earnings call. “Through the first half of the year, we have not seen a measurable impact on our overall business from these issues. Our guests continue to recognize the quality and value we offer and do not appear to be changing their dining habits.”
These comments echo the company’s first quarter results, when the consumer pullback trend began to accelerate. One slight change quarter-over-quarter, however, was a stronger mix trend in the second quarter.
“Our mix was basically flat with a positive mix in entrees, add-ons, and soft beverages,” chief financial officer Chris Monroe said, adding that the alcohol mix remained negative, but improved. The chain’s sales momentum has continued thus far in Q3, he said, with comp sales up 8% in the first four weeks.
During the call, executives reiterated that a strong value proposition is what has insulated the chain from industry-wide traffic erosion.
“Our everyday value speaks for itself. We don’t do any promotions … We feel very good about where our prices are and the value we offer,” head of investor relations Michael Bailen said. “I think we have people trading up to us, trading down to us, trading across to us, so we’re very pleased with guests’ decision to visit us. There’s a lot of folks that trade into us and feel like we are value, value, value, which is fantastic.”
Notably, that proposition comes from what Bailen calls “heaping sizes,” but also from service execution and community partnerships. To support the execution piece, Texas Roadhouse has spent the past several years investing in labor and technology solutions and that focus is starting to pay off. Bailen said restaurants are well staffed and retention levels have returned to pre-pandemic levels. Monroe added that the company has grown labor hours slower than its historical rate of 50% of traffic throughout the past few quarters, which has helped expand margins.
“[Employees] are more tenured. They’ve had more reps doing their job, so they’re better at it and they can do it more quickly. We’re not having to train as much, so we’re able to do more with what we have,” Bailen said. “That’s really what we’re seeing is a lot of the hard work the last several years coming to fruition.”
On the tech side, Texas Roadhouse completed its rollout of the Roadie First solution, which provides employees with access to their information, such as scheduling. Morgan said this will help the company “remain an employer of choice for years to come.”
Also, the company is in the process of implementing its digital kitchen system, completing 50% of the approximately 230 scheduled locations planned for this year. Nearly all restaurants are expected to be converted by the end of 2025. The system, Morgan said, organizes the kitchen cadence for employees and provides a better experience for them.
“The big win is the calmness of not having to pull paper and have paper everywhere,” he said. “And [employees] don’t stress out as much; when you have a rail of 50 checks hanging in front of you, it can be very intimidating. It’s early, but we’re excited.”
Executives noted that this sharpened focus on staffing and efficiencies will continue to provide a tailwind.
“The hard work our operators have done to get their stores well-staffed will continue to pay dividends into the back half of the year,” Bailen said.
By the numbers
- Comp sales were up 9.3% in the quarter, driven by 4.5% traffic growth and a 4.8% increase in average check
- The company opened six company-owned and three franchised locations in Q2
- Revenue growth was 14.5% during the quarter
- Average weekly sales in Q2 were approximately $159,000, with to-go representing approximately $20,000, or 12.6 of total weekly sales
- Restaurant margin as a percentage of total sales increased to 18.2%
Contact Alicia Kelso at [email protected]
