Texas Roadhouse to Hike Prices as Inflation Erodes Quarterly Profits

The steakhouse chain reported a fourth-quarter profit of $84.6 million, or $1.28 per share, falling short of the $115.8 million recorded during the same period last year. The results trailed Wall Street expectations, as analysts surveyed by FactSet had projected earnings of $1.51 per share. While total revenue grew slightly to $1.48 billion, it failed to meet the $1.5 billion forecast, reflecting a challenging environment for the hospitality sector.

The Impact of Commodity Inflation

Chief Executive Officer Jerry Morgan attributed the performance to ongoing commodity inflation, which continues to weigh on the company’s bottom line. Restaurant margins as a percentage of sales contracted to 13.9%, as the chain grappled with a 9.5% surge in the cost of goods and a 2.5% increase in labor expenses. To mitigate these pressures, the company confirmed it will implement a nearly 2% price hike across its menu this spring.

Comparable store sales grew by 4.2% during the quarter, missing the 5.2% growth anticipated by the market. However, management pointed to a stronger start to the current fiscal year, noting that same-store sales jumped 8.2% during the first seven weeks of the first quarter. For the full year, the company slightly adjusted its tax guidance, now expecting an effective income tax rate between 14% and 15%.