Texas Roadhouse outlines 35 new restaurant openings and 7% commodity inflation for 2026 while expanding regional beverage offerings

Earnings Call Insights: Texas Roadhouse (TXRH) Q3 2025

MANAGEMENT VIEW

* Jerry Morgan, CEO, highlighted continued strong top line momentum in the third quarter, stating "Our strong top line momentum continued in the third quarter with revenue topping $1.4 billion." Morgan underscored record quarterly growth in revenue, same-store sales, and traffic, attributing performance to the company's "people first focused value proposition and operational excellence."
* Morgan announced the opening of 7 company-owned locations, including 2 Bubba's 33 and 1 Jaggers, and confirmed the company remains on track for approximately 30 new restaurant openings across its three brands in 2025. Additionally, Texas Roadhouse acquired 20 franchise restaurants this year and expects franchise partners to open another location in Q4.
* For 2026, Morgan detailed plans to open "approximately 35 company-owned restaurants, including approximately 20 Texas Roadhouses, 10 Bubba's 33 and as many as 5 Jaggers," as well as the acquisition of the remaining 5 California franchise locations at the beginning of the year. Franchise partners will open 10 more restaurants, including 6 international Texas Roadhouses and 4 domestic Jaggers.
* Morgan noted the success of regional beverage innovations, such as mocktails and $5 beverage specials, and ongoing tests like dirty sodas in Utah and Idaho. He also emphasized the positive guest response to new menu offerings and the robust performance of the To-Go and retail businesses, which now have a presence in over 120,000 retail outlets.
* Keith Humpich, Interim CFO, stated, "Weekly sales averaged nearly $162,000 at Texas Roadhouse, $119,000 at Bubba's 33 and over $75,000 at Jaggers." Humpich reported higher-than-expected beef inflation in Q3, updated full year 2025 commodity inflation guidance to approximately 6%, and set initial 2026 guidance at approximately 7%. Wage and labor inflation guidance for 2025 remains at 4%, with 2026 projected at 3% to 4%.
* Humpich disclosed a Q3 cash balance of $108 million and cash flow from operations of $144 million, noting $214 million in capital expenditures, dividends, and share repurchases. Capital expenditures for 2026 are guided at approximately $400 million, excluding the California franchise acquisition.

OUTLOOK

* Commodity inflation guidance for 2025 has been updated to approximately 6%, and for 2026 is set at approximately 7%. Management expects to be above this guidance in the first half and below it in the second half of 2026.
* Wage and labor inflation guidance for 2026 is 3% to 4%, with mandated increases comprising about 1%. The company expects 5% to 6% store week growth in 2026, supported by new openings and acquisitions.
* Capital expenditure guidance for 2026 is established at approximately $400 million, excluding the California franchise acquisition.
* The company updated full year 2025 income tax rate guidance to approximately 14.5% and set 2026 guidance at approximately 15%.

FINANCIAL RESULTS

* Texas Roadhouse reported Q3 2025 revenue growth of 12.8%, driven by a 5.5% increase in average weekly sales and 6.8% store week growth.
* Restaurant margin dollars increased 1.1% to $204 million, and diluted earnings per share decreased 0.8% to $1.25.
* Average weekly sales in Q3 were over $157,000, with to-go representing 13.6% of total weekly sales.
* Comparable sales grew 6.1%, driven by 4.3% traffic growth and a 1.8% increase in average check. Restaurant margin dollars per store week decreased 5.3% to approximately $22,500, and restaurant margin as a percentage of total sales declined 168 basis points year-over-year to 14.3%. Food and beverage costs were 35.8% of total sales, up 224 basis points year-over-year, primarily due to 7.9% commodity inflation.
* Labor as a percentage of total sales decreased 18 basis points to 33.6%. Labor dollars per store week increased 5.2% due to a 3.9% wage and labor inflation and 1.3% growth in hours.
* G&A dollars declined 1.4% year-over-year to 3.8% of revenue.

Q&A

* Sara Senatore, BofA Securities: Questioned beef inflation assumptions and beverage mix trends. Michael Bailen responded that for 2026 "we are assuming high single-digit inflation when it comes to formula pricing...the combination of those 2 things is what gets us into low double-digit unweighted beef inflation." Morgan discussed beverage program trends, noting success with mocktails and regional offerings. Bailen clarified that "we're continuing to see some negative alcohol mix that's really remained consistent through the year" offset by mocktail and soft beverage mix.
* Gregory Francfort, Guggenheim: Asked about the structural versus transitory nature of beef inflation. Bailen explained, "We are in a cattle cycle and it is transitory in nature...when you come out of it, settle in probably higher than where you came into it."
* Jacob Aiken-Phillips, Melius Research: Asked about consumer trends across cohorts. Morgan and Bailen saw no significant shifts by income or age, emphasizing the menu's broad value appeal and consistent traffic across all segments and regions.
* David Palmer, Evercore ISI: Inquired about pricing philosophy and Bubba's 33 sales trends. Morgan emphasized a conservative approach to pricing and strong belief in Bubba's brand resilience.
* David Tarantino, Baird: Asked about restaurant profit dollar declines. Morgan said, "We always try to have a conservative approach...we want to talk to our partners before we make a decision like that." Bailen noted restaurant margin dollars per store week remain about 35% higher than in 2019.
* Multiple analysts highlighted beef inflation, labor trends, CapEx strategy, development pace, and retail expansion.

SENTIMENT ANALYSIS

* Analysts showed a slightly negative to neutral tone, raising concerns about beef inflation, restaurant profit margins, and the potential for two consecutive years of profit dollar declines. Questions pressed management on pricing, cost controls, and strategic responses to inflation.
* Management maintained a confident but cautious tone, repeatedly referring to conservative pricing and long-term outlook. Morgan stated, "We feel very comfortable at approximately 20" new Texas Roadhouse openings for 2026, and Bailen used phrases like "we are assuming high single-digit inflation" and "we're continuing to see" to signal cautious confidence.
* Compared to the previous quarter, management's tone remained steady, with ongoing emphasis on value and operational excellence, but with more explicit acknowledgment of inflationary pressures and a slightly more defensive posture when addressing profitability.

QUARTER-OVER-QUARTER COMPARISON

* Guidance for commodity inflation increased from 5% to 6% for 2025 and introduced a higher 7% estimate for 2026, reflecting continued beef cost volatility.
* The company accelerated development plans for 2026, targeting 35 new company-owned restaurants, up from 30 in 2025.
* Restaurant margin as a percentage of sales continued to decline, with a sharper decrease noted in Q3.
* Management’s tone remained focused on long-term strategies but showed heightened sensitivity to inflation and cost management. Analysts pressed more on structural cost challenges and margin protection versus the prior quarter.
* While the focus on value and menu flexibility for customers remained, the Q3 call brought increased attention to labor cost efficiency and retail expansion.

RISKS AND CONCERNS

* Beef inflation remains a significant risk, with management updating guidance and highlighting ongoing volatility. Bailen noted, "there is certainly significant volatility and multiple unknowns related to beef prices."
* Restaurant margin compression and potential for consecutive years of profit dollar declines were flagged as key concerns.
* Labor inflation and mandated wage increases pose additional challenges, although guidance is for moderation in 2026.
* CapEx discipline and the ability to balance growth with cost control were discussed in the context of increased development and franchise acquisitions.

FINAL TAKEAWAY

Texas Roadhouse management emphasized strong traffic and sales growth, supported by operational execution and menu value, while addressing significant headwinds from commodity and labor inflation. The company’s outlook features ambitious development plans and investment in technology and retail initiatives, but margin compression and beef cost volatility remain central risks as leadership maintains a cautious approach to pricing and cost management for the coming year.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/txrh/earnings/transcripts]

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