TXRH earnings call transcript, November 5, 2026

Yeah.

Hey, Jacob, on the CapEx for both this year and next year, Jerry mentioned. We've got approximately 35 restaurants that will open this year and another 35 that will open next year, approximately across the three brands. The 27 openings will be more evenly spread throughout the year, and so some of our CapEx for... next year is hitting our Q4 number this year, as well as obviously the Q4 numbers. That is driving it. We are very excited about that prospect of having... more restaurants open sooner in the year, next year. I think the other thing driving the 2026 number is we did purchase a neighboring property next to our support center. That'll further support our growth in the years to come.

Yeah, thank you. You know, obviously we had the opportunity to be face-to-face with our operators during the fall tour to really talk about how do we strengthen our... our position in the market. So, you know, it's been about our food, our value, the trust we have with our guests and getting out in our communities. And so I think that was the real marching orders. We'll continue to focus on our early dine offers. Our Wild West Wednesday and things that we can do, but mostly it's about making sure that every guest that walks through those doors, we're taking great care of and that we're going out in our communities and shaking hands with folks we might not have seen in a little while and trying to. to engage, and so I think that has been our strategy and it's obviously working, as we can tell in the numbers now.

You know, we exited the month of October higher than what we entered it. And thus far in November, we have seen a further increase from where we exited October. Michael, I'll turn over to you on the consumer.

Yeah, so the consumer environment, it still feels, you know, very... Similar to what we've seen throughout the year. You know, sentiment is, you know, still not the highest amongst the consumer, but I still believe the behavior when it relates to casual dining remains the same. People want to be out. They want food service and value. And those who can deliver on that are continuing to drive people into their restaurants. And that's what we're focused on. That's what we've always been focused on. So, you know, it's kind of business as usual. You know, here at Texas Roadhouse and don't feel anything is really different from the consumer environment.

I'll tell you that 4% number, about half of that is driven by beet. And the other half is coming from non-protein items, specifically oils and produce items. So you are correct. I think. Referring to maybe an improving or less inflationary beef environment, but there are other items within our baskets that have been fairly benign for multiple years that are seeing some pressure at present, given what's going. on in the world today. And freight costs add to that as well. So we expect to maybe be on the higher side of that in commodity inflation guidance early. Q1 could be, you know, in that 5% range and then seeing it step down. But I think the important thing to realize is it's not all beef in the expected inflation for 2027.

Hey, Andrew.

Michael, you know, I hear the concern. I don't know if I believe that that's really what's going on. And I don't know that I think that retail beef prices have come down. Maybe they aren't inflating as much as they have, but, you know, beef as a protein is still very expensive at the grocery store and, you know, the relative value of coming to Texas Roadhouse for that steak is still very attractive. You know, we've talked about, yes, our traffic trends do tend to outperform in times of higher commodity inflation. That does not, in beef inflation, that doesn't mean that we're not going to perform with and beef is not as inflationary. But again, I don't think we're yet in an environment where beef relative to other proteins looks cheap in the grocery store.

Thanks very much.

Yeah, thank you. This is Jerry. Yeah, in the digital kitchen, we're completely rolled out. I think we're really I've gotten used to the system and how it is helping our operators with the orders and the assembly of the food to go out to. So I think there's a lot of wins from that standpoint, just the calmness in the kitchens and how everybody has adjusted to it so well. And so completely rolled out, really continuing to learn out what it can do for us. Outside of just making our orders more consistent and concise, to your point, the digital kitchen and to-go orders, being able to really work that into the dining room flow has been extremely helpful. So we've obviously seen our dining room. Growth sales and our to-go business. That is absolutely a part of it. The mobile PLS is in a hundred stores, as I think we mentioned. It's on version two. We're currently writing that software on ourselves and we're having a lot of. success with it. We do have a plan for 2027 to roll out approximately 200 more restaurants and then we'll finish up probably in 2028 if everything continues to go. Well, and obviously that handheld mobile PLS does help us in many ways. I think there's a generation of servers that absolutely love the tablet. I think there's others that still want to have the hardwired. PLS and be able to write down an order and interact in that fashion. So being able to have the flexibility to do both, I think will serve Roadie Nation extremely well. But we're very pleased with the rollout of the hundred stores that we

Yeah, thank you for the question. We we're excited about the pasta. It's been on one of our regions menu in a market for probably 20. Plus years, I had an opportunity to really sit with the operator and ask him why and we were getting some questions from our operators about additional menu enhancements and what that could be. We obviously added the fried. Mozzarella sticks a few years ago, which has been a real big hit. And so we really expanded from that market and tested it in a hundred stores and it went really well. Our servers love it. The guests is loving it. Our operators are really feeling good about. So we expanded that test to another hundred. So I think by going into the summer, we had a little over 200. When we got to our pricing calls, our operators were really excited about it. The word had gotten out that they felt great about the quality, that the guest was really excited about it. A new additional menu item. We don't do a lot of things like that. So it's been received very well. We had 400 more stores opt in on our October menu and the sales have been very strong, very solid. Maybe Michael can speak to a little bit about. how many stores or how many units we're moving. But I will tell you, it's a great product. We're very proud of it. And it's exciting to have some refreshing menu item. And it may be a little bit of that game changer when people are driving in the.

And we haven't had pasta on the menu on a national level for a long time. So this could be a real win for us in the long term. But still early on, I think, to have that many stores to know the impact. But it is a great product. And we're really. excited about it. Jerry, to your point, I probably won't get into the exact number. I mean, we're selling a good number. It's probably not going to be one of our top ten mix. Entree items that we offer, but it rounds out the menu and it's a great choice for somebody who wants something a little bit different. And so I don't really expect it to change anything with. Our mixed trends or margin trends from it. But, but again, it was something that we thought fit well into the menu.

Thanks, Chris.

You know, I do believe having the conversation with our operators face-to-face and really understanding what we do. I feel if I look at July and August and then I look at September and then I look at where we're at today, we are a very trusted brand out there. And I do believe that people understand that. And so I think the confidence of us really doubling down on running great shifts, running. Open in our business, being great community partners is really the way to go. Will we lean into other avenues if we need to? Absolutely. We're not worried. We are definitely business people, but the trends and the signs show. We believe that those were false accusations and that absolutely our sales are coming back. Our relationship with our communities across the nation are strong and people believe that. And we're just going to continue to open our doors and serve our food. and show them high level hospitality and and show them that we're loving partners in that community. And and I believe that we will continue to get back to exactly where we were going into it. And then, you know, on the on the labor question. Mike, you know, I think I think it's safe to say our operators are managing the business for the long term. You know, they've got a second to none ownership mentality. And so quarterly results. Are are less important to them the long term is. And so from a labor efficiency perspective, we'll I'll repeat something we say a lot, and that is our our MPs. They staffed for the sales and the traffic.

They want in the long term. And so I don't think you'll see much of a change from us in that approach at all.

Hey John, this is Jerry.

Hey, Logan, it's Mike.

Hey, Dennis, it's Michael.

That can, you know, weigh down on the margin on a quarter over quarter basis. But over time, we are very encouraged by what we're seeing.

And Kenneth, we're ready for the next question.

Hi, this is Aryan.

Yeah, this is Michael.

And, you know, it looks like maybe it's flat for the quarter, which is, you know, better than it's been for, you know, call it six or seven quarters. So I was just curious, you know, what's driving that? You know, it sounds like that you're still seeing that trade up. Maybe alcohol is. Moderate it, maybe non-alcohol, alcoholic, and that's part of maybe what's inspiring the, you know, the mocktails and dirty sodas, or rather the energizers. So I just wanted to sort of understand that and broadly speaking. Is there an opportunity, or maybe it's just too small for mix to actually impact your margin? Because, you know, obviously, you know, food margins on beef tend to be lower than pretty much anything else. So just trying to understand. you know, kind of the margin complexion if you do start to see a pickup in your beverage business, or even the pasta, or if it's just too, you know, kind of small to move the needle.

Hey, Sarah, it's Michael.

Thanks very much.

Sure. Hey, Brian, it's Michael. Fourth quarter commodity inflation. We're now expecting about approximately 4.5%. That's down from, I would say, approximately 5% that we were expecting, you know, when we, you know, updated your last quarter. So a little bit better, you know, there. And you're right, the labor inflation. You know, you know, you know, is, has come down the, you know, the wage component of that inflation, you know, continues to moderate. Now, some of that is also, you know, because. Because, you know, the last two years we required some of our California franchise stores where wage rates are much higher and that was adding some pressure to wage inflation. We don't have that in 2027, but, you know, I'd say two. Thirds of the wage and other inflation expected for 2027 is coming from the wage side of it and the remainder is coming from health insurance costs and other components of labor.

I think there's still some confusion. On the trajectory of the recovery. So just to get a little more detail, is it fair to say that the comp exited flat or perhaps a little negative in late September and then gradually improved through October and now roughly three. or four points better versus the trough. Is that a fair characterization?

Um, I don't, you know, Zach, I would say we certainly, I'm probably not going to get you as specific an answer as you may like, but, but certainly, um, you know, we have seen sequential improvement every week of, you know, certainly through the five weeks of the, of the fourth quarter. Um, and, and, and so, yes, we are continuing to see. You know, those numbers get better. I'm not gonna put a specific number around it, but every week has gotten better. And, uh, you know, we're encouraged by what we're, um, you know, seeing right now, but sometimes, you know, maybe the, maybe the recovery takes, you know, a little bit, you know, has taken a little bit longer than some would have expected, but our operators are out there busting their butts and, you know, they've doubled down on everything they're doing. And, uh, if there's any, you know, um, group of managers, operators out. there who are up for this challenge, it's the Texas Roadhouse managing partners and the whole teams out there who are compensated off their restaurants. So, uh, they're out there and, you know, working and not sitting back, uh, just waiting to see what might happen.

We have reached the end of the question and answer session. I will now turn the call back to Jerry Morgan for closing remarks. Thank you.

And I want to just thank you all for joining us tonight and a special thanks to our management team and all of our roadies at our new Clarksville restaurant on their first day serving Clarksville, Indiana in that brand new store. Let's go. Clarksville, Indiana.