Texas Roadhouse Tops Zacks Ests – Analyst Blog

Texas Roadhouse Inc. (TXRH), a casual dining restaurant chain, recently posted first-quarter 2010 results that topped the Zacks Consensus Estimate on the heels of top-line growth, favorable commodity cost and lower pre-opening expenses.

 

The quarterly earnings of 27 cents a share surpassed the Zacks Consensus Estimate of 23 cents and climbed 31% year over year. Management now expects fiscal 2010 earnings to rise between 14% and 18%.

 

Louisville, Kentucky based company Texas Roadhouse said that total revenue for the quarter climbed 5.5% to $259.6 million. Restaurant sales jumped 5.4% to $257.3 million, whereas franchise royalties and fees surged 15.1% to $2.3 million.

 

Comparable-store sales grew 0.4% at company-owned restaurants and 0.9% at franchised restaurants during the quarter. However, Texas Roadhouse hinted that comparable-store sales dipped 0.3% in the first four weeks of second-quarter 2010, sending the stock down 79 cents or 5.1% to $14.60 in after-market trading.

 

Casual dining restaurant segment has been hit hard by the recent economic downturn, as cash-strapped consumers trade down to quick service restaurant operators like McDonald’s Corporation (MCD) due to cheaper dining options, or prefer to eat at home. However, with the revival of the economy, some signs of improvement have been visible in the segment.

 

Texas Roadhouse, which offers specially seasoned steaks, now sees comparable-store sales to be flat to up by 1% in fiscal 2010.

 

Restaurant operating cash flow margin expanded 218 basis points (bps) to 20.1%, helped by a 185 bps fall in cost of sales to 32.2% due to lower commodity cost, an 18 bps dip in labor cost to 29.1% and a 19 bps drop in other operating cost to 16.6%, partially offset by a 4 bps rise in rent to 2%. Going forward, management anticipates a favorable commodity environment for the remainder of 2010, and forecasts a food cost deflation of 2.5% to 3% for the year.

 

During the quarter, Texas Roadhouse opened three company-owned restaurants, and plans to open 14 to 15 outlets in fiscal 2010. At the end of the quarter, there were 264 company-owned and 70 franchised restaurants.