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01/11 03:19
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
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.
Revenue Revenue for the quarter grew to over $1.5 billion, marking a 12.7% year-over-year increase. This growth was primarily driven by a 5.3% increase in average weekly sales and 7.2% store week growth.
Same-store sales Same-store sales increased by 5.8% year-over-year, driven by 4% traffic growth and a 1.8% increase in average check.
Restaurant margin Restaurant margin dollars increased by 6.1% to $257 million. However, restaurant margin as a percentage of total sales decreased by 108 basis points year-over-year to 17.1%, due to a 5.2% commodity inflation and shifts within the entree category, partially offset by a 1.8% check increase.
Food and beverage costs Food and beverage costs as a percentage of total sales were 34%, reflecting a 131 basis point year-over-year increase. This was driven by 5.2% commodity inflation and shifts within the entree category.
Labor costs Labor as a percentage of total sales increased by 6 basis points to 32.9% year-over-year. Labor dollars per store week increased by 5.4%, driven by wage and other labor inflation of 3.8% and growth in hours of 1.6%.
Other operating costs Other operating costs were 14.5% of sales, which improved by 32 basis points compared to the second quarter of 2024. This improvement was driven by leverage on operator bonuses and a year-over-year change in the quarterly reserve for general liability insurance.
Diluted earnings per share (EPS) Diluted EPS increased by 4% year-over-year to $1.86.
Cash flow from operations Cash flow from operations was $128 million, offset by $148 million of capital expenditures, dividend payments, and share repurchases, as well as $16 million for franchise restaurant acquisitions.
Revenue growth: Revenue for the quarter grew to over $1.5 billion, marking the first time in company history to surpass this milestone.
Brand performance: Texas Roadhouse averaged $172,000 in weekly sales, Bubba's 33 averaged $128,000, and Jaggers averaged $76,000 in weekly sales.
Menu pricing: A menu price increase of approximately 1.7% will be implemented at the beginning of the fourth quarter to offset inflationary pressures.
Expansion of Bubba's 33: Currently has 53 locations in 16 states, with plans to expand to 200 locations, including double-digit openings next year.
Expansion of Jaggers: Plans to open as many as eight company and franchise locations next year.
New restaurant openings: Opened four company-owned restaurants in Q2, including two Bubba's 33 locations, and plans to open approximately 30 company-owned restaurants this year.
Franchise expansion: Franchise partners opened one Jaggers location in Q2 and plan to open four international Texas Roadhouse restaurants in the second half of the year.
Franchise acquisitions: Acquired three franchise restaurants in Q2, totaling 17 acquisitions this year, with plans to acquire three more in Q4 and five California franchise restaurants in 2026.
Support center purchase: Entered into an agreement to purchase support center buildings for $23 million, solidifying long-term space planning.
Capital allocation: Maintaining $400 million in capital expenditure guidance for 2025, focusing on new restaurant development, existing restaurant maintenance, and share repurchases.
Inflation management: Guidance for full-year inflation increased to 5%, primarily due to beef inflation, with labor inflation guidance lowered to 4%.
Inflationary Pressures: The company is facing inflationary pressures, particularly higher-than-expected beef inflation in the third quarter, which has led to an increase in full-year inflation guidance to approximately 5%. This could impact profit margins and operational costs.
Labor Costs: Labor inflation remains a challenge, with wage and other labor inflation estimated at approximately 4% for the year. This could increase operational expenses and affect profitability.
Commodity Costs: The company experienced 5.2% commodity inflation in the second quarter, which increased food and beverage costs as a percentage of total sales. This could pressure restaurant margins.
Tariffs: Approximately 30 basis points of full-year inflation is attributed to tariffs, which adds to the cost pressures faced by the company.
Restaurant Margin Decline: Restaurant margin as a percentage of total sales decreased by 108 basis points year-over-year to 17.1%, driven by higher commodity and labor costs. This decline could affect overall profitability.
Capital Expenditures: The company has significant capital expenditure plans, including $400 million for the year, which could strain cash flow and financial flexibility if not managed effectively.
Revenue Growth: Guidance for full year inflation increased to approximately 5%, primarily due to higher than previously forecasted beef inflation, particularly in the third quarter.
Labor Inflation: Guidance for full year wage and other labor inflation lowered to approximately 4%.
Capital Expenditures: Maintaining full year capital expenditure guidance at approximately $400 million, inclusive of the acquisition of support center buildings for $23 million.
Menu Pricing: A menu price increase of approximately 1.7% will be implemented at the beginning of the fourth quarter to offset inflationary pressures.
New Restaurant Development: Plans to open approximately 30 company-owned restaurants in 2025, with double-digit openings for Bubba's 33 and up to eight new Jaggers locations next year.
Franchise Acquisitions: Plans to acquire three more franchise locations in the fourth quarter of 2025 and the remaining five California franchise restaurants at the beginning of 2026.
Dividend and Share Repurchases: Dividends are expected to increase annually at a measured rate, and share repurchases will at least offset dilution.
Tax Rate: Updated guidance for full year 2025 income tax rate to approximately 15%.
Dividend Payments: The company made dividend payments during the second quarter and expects the dividend to continue increasing annually at a measured rate.
Share Repurchases: The company repurchased shares during the second quarter and plans to repurchase shares at a minimum to offset dilution. Additional share repurchases may occur as appropriate.
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.
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.
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.
The earnings report shows mixed results: a slight increase in revenue and EPS, but declining margins and increased labor costs. The Q&A reveals concerns about pricing below inflation and labor leverage, but management remains optimistic about sales rebounds and operational efficiencies. The neutral outlook is due to the balance between positive sales growth and negative margin pressures, with no significant catalysts for a strong price movement.
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