Texas Roadhouse: 5 Key Takeaways for Long-Term Investors

Core Insights - Texas Roadhouse reported strong performance in Q4 2024, achieving nearly $5.4 billion in revenue and record average unit volumes, driven by positive traffic growth across its brands [2][4] - The company’s value-focused strategy has led to traffic growth that outpaces the industry, demonstrating its competitive advantage [3][5] Traffic Growth - Texas Roadhouse achieved an 8.5% increase in same-store sales for 2024, with 4.4% attributed to traffic growth; Q4 saw a 7.7% comparable sales increase, including 4.9% traffic growth [4] - The company’s ability to attract guests without relying solely on price increases highlights the effectiveness of its value proposition [3] Value Positioning - The company prioritizes value perception over short-term margin gains, implementing a modest 1.4% menu price increase to maintain its competitive edge [5][6] - Texas Roadhouse's pricing strategy remains conservative compared to peers, with planned pricing increases below inflation rates [6] Margin Improvement - Despite inflationary pressures, Texas Roadhouse improved restaurant-level margins, with margin dollars per store week increasing 20.8% year-over-year to approximately $26,000 [7] - Restaurant margin as a percentage of total sales rose by 172 basis points to 17%, contributing to a 42.5% growth in earnings per share [7] Development Strategy - The company maintains a disciplined approach to new restaurant openings, planning approximately 30 new locations in 2025 while focusing on quality [8] - Texas Roadhouse is also pursuing growth through relocating high-performing restaurants and reaffirming its target of 900 domestic locations [8] Financial Position - Texas Roadhouse ended the year with over $245 million in cash and generated over $750 million in cash flow from operations, allowing it to self-fund growth initiatives [10] - The company plans approximately $400 million in capital expenditures for 2025 and has approved an 11% increase in quarterly dividends [10] Future Outlook - Management expresses cautious optimism for 2025, emphasizing operational excellence and value as key competitive advantages [11] - Key areas to monitor include consumer response to price increases and commodity cost trends in the latter half of 2025 [12]