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Texas Roadhouse reported third quarter earnings results Thursday after market and, once again, beef inflation dominated much of the commentary on the call.
Interim chief financial officer Keith Humpich said beef prices in the third quarter were higher than anticipated and are expected to remain elevated into the first part of 2026. Texas Roadhouse has updated its full-year commodity inflation guidance to approximately 6%, accordingly.
“As everyone is aware, there is significant volatility and multiple unknowns related to beef cycles,” he said.
Indeed, several restaurant companies have reported pressure from beef prices this quarter as they push historically high levels. But more than 50% of Texas Roadhouse’s basket is beef, so the steakhouse is disproportionately impacted in this environment. Because of this pressure, restaurant margin as a percentage of restaurant and other sales decreased 168 basis points to 14.3% during the quarter.
Vice president of investor relations Michael Bailen said the current inflationary levels are temporary, providing a dim light at the end of this quarters-long tunnel.
“The industry, the experts, our purchasing department all believe we are in a cattle cycle (that) is transitory in in nature,” he said. “Right now, everything we’re told and believe is that this is a cyclical issue and one we just need to manage (through).”
That said, the casual-dining chain still outpaced most of the industry in Q3, with same-store sales up 6.1% in Q3, including a 4.3% increase in traffic. During the company’s earnings call, Bailen said those traffic gains may be coming from grocery customers, which would be the opposite of an industrywide exodus toward grocery stores in the past year and a half as menu prices remain higher than food-at-home prices.
“I think people are aware of what it costs to buy beef in the grocery store, and maybe we weren’t seeing as much retail demand degradation in the second and third quarter and you’re seeing a little bit more of that now,” Bailen said. “We have seen this year that more of our guests are getting a steak than what we have seen in years past. I think they are recognizing the value of our steak offerings relative to what they can do at home.”
Chief executive officer Jerry Morgan added that Texas Roadhouse is “drawing everyone,” from high-end steakhouse customers to quick-service customers.
“We’ve got quality, made-from-scratch food. We cut our own steaks, and we’ve got this energy, this vibe, in these restaurants,” he said. “I think the American consumer is saying they like what we’re doing from an energy, a hospitality, standpoint.”
Executives added that they have seen strong results across dayparts and regions, as well as from both dine-in and to-go channels.
“We’re very happy with what we’re seeing from the consumer and believe that just goes to the value that we offer and the overall experience we’re offering,” Bailen said. “The guest still is enjoying what they’re getting from us.”
Texas Roadhouse Q3 by the numbers
Same-store sales increased 6.1% at company restaurants
Average weekly sales at company restaurants were $157,325 of which $21,409 were to-go sales, versus $149,176 of which $18,914 were to-go sales in the prior year
Restaurant margin dollars increased 1.1% to $204.3 million from $202.1 million in the prior year primarily due to higher sales. Restaurant margin, as a percentage of restaurant and other sales, decreased 168 basis points to 14.3% as commodity inflation of 7.9% and wage and other labor inflation of 3.9% were partially offset by higher sales
Seven company restaurants and two franchise restaurants were opened
Contact Alicia Kelso at Alicia.Kelso@informa.com
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