Inflated Costs Daunt Texas Roadhouse Profits, but Revenue Stays Strong

Restaurant chain Texas Roadhouse (NASDAQ: TXRH  ) reported third-quarter results after the market closed on Oct. 28. The company, which focuses on providing a full-service casual steakhouse environment to diners, saw its quarterly revenue rise 8.4% compared with Q3 of 2012, to $334.7 million, or $0.24 diluted earnings per share.

Texas Roadhouse's quarterly profit margins dropped slightly from this time in 2012, with operating margins coming at 7.6% compared with Q3 2012's 8.9%. The company brought in $17.1 million in net income, or 5.1% of its overall revenue, versus Q3 2012's $18 million and 5.8% profit margin. According to the company's earnings release, these lower profit margins were due to a food cost inflation of more than 8%.

CEO Kent Taylor expects the drop in profit margins to be short lived going into the next year, saying the company is "encouraged by expectations of much lower commodity cost inflation in 2014, and ... excited to be on pace for another year of 25 to 30 restaurant openings."

This quarter, Texas Roadhouse also opened four new company restaurant locations, and its comparable restaurant sales for company restaurants increased 2.6%, while franchise locations saw a 4% increase in comparable sales.

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9/28/2016 9:36 AM
TXRH $40.61 Down -0.41 -1.01%
Texas Roadhouse CAPS Rating: *****