Through the first six months of fiscal 2007, net sales rose a respectable 21.3%, with the bulk of the growth coming from new restaurants that have opened over the past 12 months. Texas Roadhouse currently operates 272 locations, or 36 more than it did this time last year.
Comparable same-store sales still remain rather unimpressive, although they do appear to be improving. In the second quarter, comps came in at 1.9% at company-owned restaurants and 1.8% at franchised sites. During the conference call, company managers seemed pleased with these figures, particularly when accounting for what they describe as a "challenging" operating environment. The management team is calling for comps to move slightly higher, into a range of 2% to 3%, for the remainder of the year.
Restaurant margins for the second quarter fell slightly from year-ago levels. Looking over the next six months, management is looking for those margins to come in flat to down 25 basis points. Higher dairy and produce costs are one reason for the pressure.
The good news is that on an operational level, Texas Roadhouse should make up any kind of loss it might see in restaurant profitability. The management team is projecting a gain of 25 to 50 basis points on operating margins, as a result of leveraging of general and administrative expenses.
In a nutshell, Texas Roadhouse looks to be simmering at just the right level. While competition abounds in the casual-dining segment, Texas Roadhouse is holding up well. Its stock has fallen slightly for the year, but that shouldn't dissuade an investor from taking a closer look at the company. With ample development opportunities before it, expansion should continue driving strong double-digit growth.
More Foolishness on the casual dining segment:
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