Texas Roadhouse Q3 Earnings Call Highlights

Key Points

• Third-quarter revenue rose 9.5% to $1.6 billion and diluted EPS increased 8.6% to $1.36; comparable sales grew 4.3%, driven by a higher average check and modest traffic growth. A social media hoax weighed on September sales, but trends improved through October and early November.
• Restaurant margin reached 14.6%, up 30 basis points, as higher checks helped offset food-cost inflation. Texas Roadhouse expects commodity inflation of about 5% in 2026 and 4% in 2027, with beef a major contributor.
• The company plans approximately 35 restaurant openings in both 2026 and 2027, and raised its 2026 capital spending forecast to about $440 million. It is also testing mobile point-of-sale technology in roughly 100 restaurants, with broader rollout planned.

Texas Roadhouse NASDAQ: TXRH reported third-quarter revenue of $1.6 billion and higher restaurant traffic, but said a social media hoax hurt sales in September. Executives said sales and traffic improved sequentially through October and into early November.

Revenue rose 9.5% from a year earlier, while diluted earnings per share increased 8.6% to $1.36. Comparable sales grew 4.3%, reflecting a 3.6% increase in average check and 0.7% traffic growth. Chief Executive Officer Jerry Morgan said all three of the company’s brands posted positive comparable sales and traffic growth in the quarter.

Comparable sales rose 5.9% in July and 6.8% in August before slowing to 1% in September, according to Michael Bailen, vice president of investor relations. Morgan said the quarter, particularly September, was negatively affected by a social media hoax that emerged at the end of August.

Morgan said the company’s investigation, including an external forensic analysis, determined that the allegations in the posts were false. He said operators have responded by focusing on food, service, local marketing and community relationships.

Sales trends improve after September

Comparable sales increased 1.5% in the first five weeks of the fourth quarter, including an estimated 30-basis-point negative impact from Halloween shifting to a Saturday from a Friday, Chief Financial Officer Mike Lenihan said. He said sales and traffic improved sequentially throughout October and into early November.

Bailen told analysts that comparable sales had improved each week during the first five weeks of the fourth quarter, although he declined to provide more specific weekly figures. Lenihan declined to give quarterly sales guidance and noted that the fourth quarter includes 2.9 percentage points of pricing.

For the full fourth quarter, the company estimates that the timing of Halloween and Christmas will reduce same-store sales growth by approximately 75 basis points. Lenihan said the company had not seen a meaningful change in guest ordering behavior after a 1% menu price increase at the start of the quarter.

Bailen said the company had not seen evidence of a broader consumer slowdown in its sales mix. Guests continued to order steaks or larger entrées, he said, while the negative effect of alcohol mix had moderated. Overall mix was flat in the third quarter.

Margins rise as food inflation moderates

Restaurant margin dollars increased 11.9% to $229 million, and restaurant margin as a percentage of sales rose 30 basis points to 14.6%. Food and beverage costs fell to 35.5% of sales, as the higher average check more than offset 2% commodity inflation, Bailen said. Labor costs rose eight basis points to 33.7% of sales.

Texas Roadhouse maintained its 2026 commodity inflation forecast at approximately 5% and set a 2027 forecast of approximately 4%. Bailen said beef accounts for about half of the expected 2027 increase, with the remainder coming from non-protein items, including oils and produce, as well as freight costs. He said first-quarter commodity inflation could be around 5% before moderating.

The company narrowed its 2026 wage and other labor inflation guidance to 3.5% to 4% and projected approximately 3% for 2027. Bailen attributed some of the moderation to the absence next year of pressure from the prior acquisition of higher-wage California franchise restaurants.

Expansion and capital spending plans

The company opened five company-owned locations in the third quarter, including two Bubba’s 33 restaurants and one Jaggers. Morgan said more than 15 openings are scheduled for the fourth quarter, putting the company on track for approximately 35 openings across its three brands in 2026.

Texas Roadhouse also expects approximately 35 company-owned openings in 2027, with a more balanced schedule throughout the year. Eighteen restaurants are already under construction, Morgan said. Franchise partners plan approximately 10 openings next year, including as many as eight international Texas Roadhouse locations. The company has also reached development and franchise agreements in Vietnam and Japan.

The company raised its 2026 capital expenditure forecast to approximately $440 million from $400 million and set a 2027 forecast of approximately $425 million. Lenihan said some spending for next year’s openings is occurring in the fourth quarter of 2026. He added that the company purchased a neighboring property next to its support center.

Morgan said the company is striving to open around 10 to 12 Bubba’s 33 restaurants a year. Lenihan said the brand’s locations have generally produced high-teens cash-on-cash returns, including both newly built restaurants and conversions.

Menu and technology updates

Chicken Alfredo pasta has been added to more than 600 Texas Roadhouse restaurants and is expected to be available systemwide by the spring menu, Morgan said. Bailen said he did not expect the item to materially change sales mix or margins.

The company’s mobile point-of-sale system is being tested in approximately 100 restaurants. Morgan said Texas Roadhouse plans to add roughly 200 or more locations in 2027 and could complete the rollout by the end of 2028 if progress continues. The company has completed its digital kitchen rollout, which Morgan said has helped operators coordinate dining-room and to-go orders.

Average weekly sales were $164,000 in the third quarter, including $23,500 in to-go sales. Lenihan said weekly to-go sales dollars rose 10% from a year earlier.

About Texas Roadhouse (NASDAQ:TXRH)

Texas Roadhouse, Inc NASDAQ: TXRH operates full-service casual dining restaurants under the Texas Roadhouse, Bubba's 33 and Jaggers brands. Its restaurants serve made-from-scratch meals centered on hand-cut steaks, ribs, chicken, seafood, burgers and other American-style dishes, along with freshly baked rolls and a selection of beverages.

Founded in 1993, Texas Roadhouse began with its first restaurant in Clarksville, Indiana. The company's restaurant network includes company-owned and franchised locations across the United States, as well as international locations.

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