Texas Roadhouse (NASDAQ:TXRH) Surprises With Q4 Sales
Restaurant company Texas Roadhouse (NASDAQ:TXRH) announced better-than-expected revenue in Q4 CY2024, with sales up 23.5% year on year to $1.44 billion. Its GAAP profit of $1.73 per share was 5.4% above analysts’ consensus estimates.
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Texas Roadhouse (TXRH) Q4 CY2024 Highlights:
Jerry Morgan, Chief Executive Officer of Texas Roadhouse, Inc. commented, “We ended 2024 on an incredible note, which was highlighted by fourth quarter and full-year traffic growth at all three of our brands. These results are a credit to our operators who, as I’ve said before, continue to create an environment where Roadies want to work, and guests want to dine. I also want to thank Roadie Nation and the more than 250 million guests who supported us by dining in our restaurants.”
Company Overview
With locations often featuring Western-inspired decor, Texas Roadhouse (NASDAQ:TXRH) is an American restaurant chain specializing in Southern-style cuisine and steaks.
Sit-Down Dining
Sit-down restaurants offer a complete dining experience with table service. These establishments span various cuisines and are renowned for their warm hospitality and welcoming ambiance, making them perfect for family gatherings, special occasions, or simply unwinding. Their extensive menus range from appetizers to indulgent desserts and wines and cocktails. This space is extremely fragmented and competition includes everything from publicly-traded companies owning multiple chains to single-location mom-and-pop restaurants.
Sales Growth
A company’s long-term performance is an indicator of its overall quality. While any business can experience short-term success, top-performing ones enjoy sustained growth for years.
With $5.37 billion in revenue over the past 12 months, Texas Roadhouse is one of the larger restaurant chains in the industry and benefits from a well-known brand that influences consumer purchasing decisions.
As you can see below, Texas Roadhouse grew its sales at an impressive 14.3% compounded annual growth rate over the last five years (we compare to 2019 to normalize for COVID-19 impacts) as it opened new restaurants and increased sales at existing, established dining locations.
This quarter, Texas Roadhouse reported robust year-on-year revenue growth of 23.5%, and its $1.44 billion of revenue topped Wall Street estimates by 2%.
Looking ahead, sell-side analysts expect revenue to grow 9% over the next 12 months, a deceleration versus the last five years. Despite the slowdown, this projection is above average for the sector and indicates the market is baking in some success for its newer menu offerings.
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Restaurant Performance
Number of Restaurants
Texas Roadhouse operated 784 locations in the latest quarter. It has opened new restaurants at a rapid clip over the last two years, averaging 6% annual growth, much faster than the broader restaurant sector.
When a chain opens new restaurants, it usually means it’s investing for growth because there’s healthy demand for its meals and there are markets where its concepts have few or no locations.
Same-Store Sales
A company's restaurant base only paints one part of the picture. When demand is high, it makes sense to open more. But when demand is low, it’s prudent to close some locations and use the money in other ways. Same-store sales gives us insight into this topic because it measures organic growth at restaurants open for at least a year.
Texas Roadhouse has been one of the most successful restaurant chains over the last two years thanks to skyrocketing demand within its existing dining locations. On average, the company has posted exceptional year-on-year same-store sales growth of 9.1%. This performance suggests its rollout of new restaurants is beneficial for shareholders. We like this backdrop because it gives Texas Roadhouse multiple ways to win: revenue growth can come from new restaurants or increased foot traffic and higher sales per customer at existing locations.
In the latest quarter, Texas Roadhouse’s same-store sales rose 7.7% year on year. This growth was a deceleration from its historical levels, showing the business is still performing well but losing a bit of steam.
Key Takeaways from Texas Roadhouse’s Q4 Results
We enjoyed seeing Texas Roadhouse beat analysts’ revenue expectations this quarter. We were also happy its same-store sales was in line with Wall Street’s estimates. Overall, we think this was a decent quarter with some key metrics above expectations. The stock remained flat at $171.70 immediately following the results.
Should you buy the stock or not? The latest quarter does matter, but not nearly as much as longer-term fundamentals and valuation, when deciding if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free .