Texas Roadhouse Q2 Earnings Call Highlights

Key Points

• Strong sales momentum: Texas Roadhouse reported nearly $1.7 billion in Q2 2026 revenue, up 11.1% year over year, with same-store sales increasing 6.2% on 3% traffic growth and a 3.2% higher average check. Comparable sales also rose 6.2% during the first five weeks of Q3.
• Commodity inflation pressured margins: Restaurant margin declined to 16.4% as food and beverage costs rose to 35.4% of sales, driven primarily by 7% commodity inflation. The company lowered its full-year commodity-inflation outlook to about 5% and plans a 1% menu-price increase in Q4.
• Expansion remains a priority: Texas Roadhouse expects roughly 35 company-owned openings in 2026 and sees potential for approximately 900 U.S. Texas Roadhouse locations. It maintained its approximately $400 million capital-expenditure forecast, focused on new development and restaurant maintenance.

Texas Roadhouse NASDAQ: TXRH reported second-quarter 2026 revenue of nearly $1.7 billion as same-store sales rose 6.2%, supported by 3% traffic growth and a 3.2% increase in average check. The restaurant operator said average weekly sales exceeded $175,000 for the first time in its 33-year history.

Revenue increased 11.1% from a year earlier, driven by a 5.9% rise in average weekly sales and a 5% increase in store weeks. Diluted earnings per share declined 0.7% to $1.85, while restaurant margin dollars increased 6.9% to $275 million.

Chief Executive Officer Jerry Morgan said the company’s company restaurants generated average weekly sales of more than $183,000 during the quarter. Across the system, average weekly sales were more than $177,000, including more than $25,000 in to-go sales, which represented 14.3% of weekly sales.

Sales Momentum Continues Into Third Quarter

Texas Roadhouse said comparable sales growth continued through the first five weeks of the third quarter, rising 6.2%, while average weekly restaurant sales reached $168,000.

Morgan attributed the traffic performance to restaurant execution, including service, food quality and operational investments designed to improve both dine-in and to-go experiences. He cited pay-at-the-table capabilities, upgrades to guest-management systems and digital kitchens as factors supporting sales growth.

Chief Financial Officer Mike Lenihan said labor productivity also continued to improve. Labor hours grew at roughly 25% of the rate of comparable traffic growth in the second quarter. Lenihan said the trend reflects several factors, including technology investments, staffing practices, employee tenure and the growth of to-go sales.

Management said it does not set labor-productivity targets for restaurant operators, though Lenihan said the company hopes the favorable trend continues.

Texas Roadhouse also said demand was particularly strong during Mother’s Day and Father’s Day. Morgan said 90% of restaurants set a daily sales record on one of the company’s three major holiday occasions: Valentine’s Day, Mother’s Day or Father’s Day. A handful of locations generated more than $100,000 in single-day sales on one of those holidays, he said.

Commodity Costs Pressure Restaurant Margins

Restaurant margin as a percentage of sales declined 66 basis points from a year earlier to 16.4%, despite a 1.9% increase in restaurant margin dollars per store week to more than $29,000.

Food and beverage costs reached 35.4% of sales, up 136 basis points year over year, primarily due to 7% commodity inflation. The company said the pressure was partly offset by the 3.2% increase in average check.

Texas Roadhouse lowered its full-year 2026 commodity-inflation outlook to approximately 5%, from a previous range of 6% to 7%. The revised outlook was primarily driven by lower sirloin prices. The company expects commodity inflation of 2% to 3% in the third quarter before an expected increase to about 5% in the fourth quarter.

Michael Bailen, vice president of investor relations, said Texas Roadhouse had approximately 80% of its overall commodity basket locked for the third quarter and about 40% locked for the fourth quarter. Management said beef supply remains tight and demand remains strong, while the expected reopening of the Mexican border later in the year is unlikely to provide a meaningful near-term supply benefit.

Labor costs improved as a percentage of sales by 40 basis points to 32.5%. Labor dollars per store week rose 4.7%, reflecting 3.9% wage and other labor inflation and 0.8% growth in labor hours. The company maintained its full-year wage and other labor inflation outlook of 3% to 4%.

Other operating costs improved by 28 basis points to 14.2% of sales, aided by higher sales and a $1.1 million net benefit related to the company’s general liability insurance reserve.

Pricing and Development Plans

Texas Roadhouse plans to implement a 1% menu price increase at the beginning of the fourth quarter. Lenihan said the action would result in 2.9% pricing in both the fourth quarter and the first quarter of 2027.

Morgan said the company will continue to take a conservative approach to menu pricing, weighing structural inflation against its goal of maintaining an everyday value proposition. He said pricing decisions are reviewed twice each year with input from restaurant operators and local markets.

Second-quarter overall mix was negative by about 40 basis points, though dining-room mix turned slightly positive. Bailen said the growing mix of to-go sales offset the dining-room improvement. During the first five weeks of the third quarter, overall mix was flat as dining-room mix improved further and to-go mix also became more favorable.

The company expects to open about 35 company-owned locations in 2026, with nine openings completed during the second quarter: five Texas Roadhouse restaurants, three Bubba’s 33 locations and one Jaggers location. Six company openings are planned for the third quarter, with the remaining openings weighted toward the fourth quarter.

• Texas Roadhouse ended the quarter with 755 system-wide locations across the United States and 10 foreign countries. The company expects to open about 20 Texas Roadhouse restaurants in 2026.
• Bubba’s 33 ended the quarter with 59 restaurants in 16 states and recently opened its 60th location, its first in Iowa. The company expects at least 10 Bubba’s 33 openings this year.
• Jaggers opened its 11th company location during the quarter and is expected to have four company openings for the full year.

Management said its Texas Roadhouse development pipeline extends through 2029 and reiterated its view that the U.S. market can support approximately 900 Texas Roadhouse restaurants. The company has 20 locations open in California and six more in development, Morgan said.

Capital Position and Other Outlook Items

Texas Roadhouse ended the quarter with $202 million in cash. Cash flow from operations totaled $180 million during the quarter, offset by $191 million of capital expenditures, dividends and share repurchases. The company maintained its 2026 capital-expenditure forecast of approximately $400 million, with new development and maintenance of existing restaurants remaining its capital-allocation priorities.

The company maintained forecasts for a low-double-digit percentage increase in full-year general and administrative expenses and a low-teen percentage increase in depreciation expense. It updated its full-year effective tax-rate outlook to approximately 14%, from a prior range of 14% to 15%.

Texas Roadhouse also cautioned that calendar shifts involving Halloween and Christmas are expected to reduce fourth-quarter same-store sales growth by approximately 75 basis points.

About Texas Roadhouse (NASDAQ:TXRH)

Texas Roadhouse, Inc is a casual dining restaurant chain specializing in hand‐cut steaks, fall‐off‐the‐bone ribs, chicken, seafood and house specialties. Each restaurant features a Western‐themed décor, open kitchens and a signature line dance presentation of fresh, made‐from‐scratch sides and breads. The company emphasizes an energetic dining experience, focusing on hospitality, value and a family‐friendly environment.

The concept was created in 1993 by founder Kent Taylor, who sought to combine high‐quality steaks with an approachable, community‐oriented atmosphere.

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