Steakhouse operator Texas Roadhouse (NASDAQ: TXRH) stock has been cascading lower as sells off (-21%) on the year. The popular casual dining firm operates brands including Texas Roadhouse, Bubba’s 33, and Jaggers. Inflationary pressures have led to higher prices which helped to bolster sales higher in the quarter but squeezed margins by 213 bps as beef and commodity costs spiked 17%. The takeout business continues to fall to 14.8% from 22.3% a year ago. This illustrates the recovery of the dine-in experience as consumers prefer to dine away from home. The Company implemented a 3.2% price hike for menu items in April 2022. The Company expects commodity cost inflation to remain between 12% to 14% and labor inflation around 7% for the rest of the year. The Company continues to invest in its Roadhouse mobile app which has been downloaded over 3.7 million times since 2021 as 70% of their to-go business is digital as well as utilizing the waitlist function on the app. Prudent investors looking for exposure can watch for opportunistic pullback levels.
Q1 Fiscal Year 2022 Earnings Release
On May 5, 2022, Texas Roadhouse released its first-quarter fiscal 2022 results for the quarter ending March 2022. The Company reported a non-GAAP diluted earnings-per-share (EPS) of $1.08, beating analyst estimates of $0.91 by $0.17. Revenues rose 23.4% year-over-year (YoY) to $987.6 million versus $973.62 million under consensus analyst estimates. Comparable restaurant sales rose 16% YoY at company-owned restaurants and 20.4% at domestic franchise restaurants. Average weekly sales at company restaurants were $132,263 up from $114,201 in the year-ago period. Takeout business fell to 14.8% compared to 22.3% in the year-ago period. Restaurant margins fell to 16.4% as commodity inflation rose 17%. Texas Roadhouse CEO Jerry Morgan commented, “We continue to be very pleased with the sales levels that are being generated thanks to the hard work of our operators. While higher costs are impacting our bottom line, we remain focused on what we can control – providing legendary food and legendary service each and every shift. Our healthy cash flow continues to allow us to grow our brands through new store development. We also repurchased over one million shares of our common stock this quarter, which is our most significant buyback since before the pandemic. We believe our new store growth, share buybacks and the continued growth in our dividends reflect the ongoing commitment to our shareholders.”
Fiscal Full-Year 2022 Guidance
Texas Roadhouse reiterates positive comparable restaurant sales growth which includes a 3.2% increase in menu price items implemented in April 2022. The Company expects to expand with nearly 25 Texas Roadhouse restaurants and 33 company-owned Bubba’s restaurants. Store week growth is expected around 6.5%. Commodity cost inflation is expected between 12% and 14% with wage and labor inflation expected at around 7%.
Conference Call Takeaways
CEO Morgan pointed out that sales volume accelerated to over $132,000 per store in the quarter. The strong top-line was the earnings driver reaching 20% growth for the quarter. The 3.2% menu price increases implemented in April were absorbed well by customers with no negative mix or traffic reaction. He’s confident that while customers are feeling inflationary pressures, Texas Roadhouse will continue to maintain its market position. The Company opened three new company-owned restaurants in the quarter and its international franchise partners opened two. He noted, “In terms of 2023, we believe we can lower the impact of permitting and building approval delays, so we are optimistic that we will return to a higher level of openings. Our new restaurants, including those in smaller markets, are seeing strong sales performance, which leads to continued healthy returns on our investments. This gives us the confidence that we will still have a long runway for new Texas Roadhouse locations.”
TXRH Price Trajectories
Using the rifle charts on the weekly and daily time frames provides a precise view of the landscape for TXRH stock. The weekly rifle chart uptrend peaked near the $84.71 Fibonacci (fib) level before reversing down triggering the weekly inverse pup breakdown. The weekly 5-period moving average (MA) is falling at $79.96 followed by the falling 15-period MA at $83.05. The weekly 50-period MA is falling at $88.54. The weekly lower Bollinger Bands (BBs) sit at $70.98 overlapping the weekly 200-period MA support at $70.49. The weekly stochastic mini pup failed and crossed back down to reverse the momentum to the sell-side. The daily rifle chart downtrend has a falling 5-period MA at $73.85 followed by the 15-period MA at $77.83 and a daily 50-period MA at $81.11. The daily 200-period MA resistance sits at $87.13. The daily stochastic 20-band bounce attempt got rejected to cross back down as the daily lower BBs sit at $67.65. The daily market structure low (MSL) triggers a breakout through $80.37. Shares are oversold but can fall further. Prudent investors can watch for opportunistic pullback levels at the $69.92 fib, $66.57 fib, $62,80 fib, $58.64 fib, and the $54.47 fib level. Upside trajectories range from the $81.25 fib level up to the $95.93 fib level.
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