NASDAQ:TXRH Texas Roadhouse Q4 2023 Earnings Report $161.64 -0.20 (-0.12%) Closing price 04/25/2025 04:00 PM EasternExtended Trading$162.45 +0.81 (+0.50%) As of 04/25/2025 07:58 PM Eastern Extended trading is trading that happens on electronic markets outside of regular trading hours. This is a fair market value extended hours price provided by Polygon.io. Learn more. Earnings HistoryForecast Texas Roadhouse EPS ResultsActual EPS$1.08Consensus EPS $1.07Beat/MissBeat by +$0.01One Year Ago EPS$0.89Texas Roadhouse Revenue ResultsActual Revenue$1.16 billionExpected Revenue$1.16 billionBeat/MissBeat by +$3.21 millionYoY Revenue Growth+15.30%Texas Roadhouse Announcement DetailsQuarterQ4 2023Date2/15/2024TimeAfter Market ClosesConference Call DateThursday, February 15, 2024Conference Call Time5:00PM ETUpcoming EarningsTexas Roadhouse's Q2 2025 earnings is scheduled for Thursday, May 8, 2025, with a conference call scheduled on Friday, May 2, 2025 at 4:00 PM ET. Check back for transcripts, audio, and key financial metrics as they become available.Conference Call ResourcesConference Call AudioConference Call TranscriptPress Release (8-K)Annual Report (10-K)Earnings HistoryCompany ProfilePowered by Texas Roadhouse Q4 2023 Earnings Call TranscriptProvided by QuartrFebruary 15, 2024 ShareLink copied to clipboard.There are 18 speakers on the call. Operator00:00:00Good evening, and welcome to the Texas Roadhouse 4th Quarter Earnings Conference Call. Today's call is being recorded. All participants are now in a listen only mode. I would now like to introduce Michael Balan, Head of Investor Relations Speaker 100:00:32Thank you, Rob, and good evening. By now, you should have access to our earnings release the Q4 ended December 26, 2023. It may also be found on our website at texasroadhouse.com in the Investors section. I would like to remind everyone that part of our discussion today will include forward looking statements. These statements are not guarantees of future performance and therefore undue reliance should not be placed upon them. Speaker 100:01:01We refer all of you to our earnings release in our recent filings with the SEC. These documents provide a more detailed discussion of the relevant factors that could cause actual results to differ materially from those forward looking statements. In addition, we may refer to non GAAP measures. If applicable, reconciliations of the non GAAP measures to the GAAP information can be found in our earnings release. On the call with me today is Jerry Morgan, Chief Executive Officer of Texas Roadhouse and Chris Monroe, our Chief Financial Officer. Speaker 100:01:37Following the prepared remarks, we will be available to answer your questions. In order to accommodate everyone that would like to ask a question, We kindly ask analysts to please limit yourself to one question. Now, I would like to turn the call over to Jerry. Operator00:01:53Thanks, Michael, and good evening, everyone. 2023 was another great year for Texas Roadhouse. We generated over 4.6 $1,000,000,000 in revenue and increased average unit volumes to over $7,600,000 at Texas Roadhouse. And for the full year, comp sales grew over 10% with more than half of that increase coming from higher guest traffic. Along with this top line growth, we also reported double digit increases in restaurant margin dollars, income from operations and earnings per share for full year 2023. Operator00:02:34Our results clearly reflect the commitment our managing partners have in taking care of their guests and their communities. There are no better examples of this passion than our Veterans Day celebration and our national fundraiser to benefit tinnitus research. On Veterans Day, we honored nearly 700,000 veterans by providing a free meal or voucher for a future meal. And just over a week ago, we raised over $925,000 for the American Tinnitus Association in honor of our late founder, Kent Taylor. These are just 2 of the many ways our operators give back to their local communities. Operator00:03:192023 was a record year for system wide new store openings. For the full year, we opened 30 company restaurants across all brands. And our franchise partners opened 15 restaurants, including our first two franchised Jaggers. For 2024, we continue to expect to open approximately 30 company owned restaurants across the 3 brands. Our expectation is that this year's openings will be more evenly distributed throughout the year as compared to last year when 50% of our openings occurred in the last 4 months. Operator00:04:00Additionally, we expect our franchise partners We'll open as many as 14 international and domestic locations, including 4 Jaggers. In 2024, we will also maintain our emphasis on operational efficiencies and improving the guest and employee experience By focusing on technology investments, based on positive feedback from our operators, we're accelerating the number of digital kitchen conversions to be completed this year. We now expect to convert approximately 200 existing Texas Roadhouses to a digital kitchen in 2024. And we have also standardized this equipment for new openings at all three brands. We are also focused on increasing guest awareness of our digital platform, which is the most efficient way for our guests to put their names on the waitlist to dine in our restaurants and to place their to go orders. Operator00:05:01In closing, We are extremely excited about the direction of our business and our 3 brands. There are so many things to be proud of, But at the same time, we still have many opportunities to continue building our business going forward. Now Chris will provide some thoughts. Speaker 200:05:21Thanks, Jerry. 2023 was certainly an impressive year. Our restaurants are the busiest they've ever been, But our operators are focused on serving even more guests on every shift. Of course, we expect to continue to face inflationary pressures in 2024, albeit at a lower rate than we have experienced the last several years. Cattle supply will continue to be a challenge in 2024. Speaker 200:05:47However, we now expect the majority of the financial impact of this tightening supply to be in the back half of twenty twenty four. As such, we are updating our full year 2024 commodity inflation guidance to approximately 5% from between 5% 6%. On the labor side, our guidance for wage and other labor inflation remains unchanged at between 4% 5%. To help offset the impact of inflationary pressures, We will be implementing a 2.2% menu price increase at the beginning of our 2nd quarter. As we typically do, we partnered with our operators to determine the appropriate amount of pricing for each of our restaurants. Speaker 200:06:37This process includes looking at traffic trends, state mandated wage increases and local labor trends as well as comparing our prices to those of other restaurants in their specific community. This level of detail And operator involvement provides us with the confidence that we are taking the right level of pricing without sacrificing our value proposition. As Jerry mentioned, we opened 30 company owned restaurants in 2023, which included 22 Texas Roadhouses, 5 Bubba's 33s and 3 Jaggers. While sales volumes at New Texas Roadhouse Restaurants increased, So did the average investment cost in 2023. Part of this was the inflationary pressure on building costs that the industry faced in 2023, but it was also due to our strategic investment in building a larger prototype To be able to serve even more guests, the addition of dedicated to go areas and more back of house space needed to serve higher guest volumes has increased the size of the current prototype by approximately 10% from our pre COVID prototype. Speaker 200:07:58Returns on investment for our portfolio of new restaurants continue to exceed both our cost of capital and our targeted mid teen IRR. Before we fully shift our attention to 2024, It's important to recognize the financial accomplishments we had in 2023. We ended the year with $104,000,000 in cash and generated $565,000,000 of cash flow from operations. With this cash flow, We self funded $347,000,000 of capital expenditures as well as the $39,000,000 acquisition of 8 franchise restaurants. We also returned over $147,000,000 to our shareholders in the form of dividends, completed $50,000,000 of share repurchases and repaid the final $50,000,000 of bank debt that we borrowed at the onset of COVID. Speaker 200:08:58In 2024 and beyond, we will continue to make meaningful capital investments in existing restaurants as well as new restaurant development. At this time, our capital expenditure guidance for 2024 remains unchanged at between $340,000,000 $350,000,000 As always, investments will be evaluated to ensure we continue to put our capital to work where we create the greatest shareholder value. Overall, our shareholders were rewarded in fiscal year 2023 with EPS growth of 14.3% and a dividend yield of 2.1%. This total return of 16.4% is consistent with our average return over the past 10 years. With a disciplined approach to capital allocation and the excellent results we expect our operators to continue generating, We are confident that we can continue to reward our investors with strong returns for years to come. Speaker 200:10:05And now, Michael will walk us through the quarter results and provide additional 2024 guidance. Thanks, Chris. Speaker 100:10:13For the Q4 of 2023, we reported revenue growth of 15.3% driven by a 9.3% increase in average unit volume and 6.1% store week growth. We also reported a restaurant margin dollar increase of 21.4 percent to $177,000,000 and a diluted earnings per share increase of 21.3 percent to $1.08 Average weekly sales in the Q4 were over $141,000 with to go representing approximately $18,000 or 12.6% of these total weekly sales. At this time, to go has already become on average a $1,000,000 business per restaurant with additional room for growth. Comparable sales increased 9.9% in the Q4 driven by 5.1 percent traffic growth and a 4.8% increase in average check. By month, comparable sales grew 9.2% in both October November and 11.1% in December. Speaker 100:11:31And while weather has negatively impacted our year to date 2024 sales, Comparable sales are still up 6.8%, including 3% traffic growth for the 1st 50 days of the year with our restaurants averaging sales of approximately $155,000 per week during that time frame. In the Q4, restaurant margin dollars per store week increased to over $21,600 And restaurant margin as a percentage of total sales increased 75 basis points year over year to 15.3%. Food and beverage costs as a percentage of total sales were 34.2% for the 4th quarter. The 88 basis point year over year improvement was driven by the benefit of a 4.8% check increase offsetting the 3.2% commodity inflation for the quarter. Commodity inflation for full year 2023 was 5.6%, which was the midpoint of our guidance. Speaker 100:12:43Labor as a percentage of total sales decreased 28 basis points to 33.1 percent as compared to the Q4 of 2022. Labor dollars per store week increased 7.9% due to wage and other labor inflation of 5.5% and growth in hours of 2.4%. For the full year, wage and other labor inflation came in at 6.6%, which was the midpoint of our 2023 guidance. As Chris mentioned, we continue to expect wage and other labor inflation of between 4% 5% in 2024. Included within this guidance is approximately $3,000,000 of additional labor expense in the second half of twenty twenty four from enhancements to our equity compensation program, including a move from quarterly to annual grants. Speaker 100:13:44Other operating costs were 15.8 percent of sales, which was 49 basis points higher than the Q4 of 2022. Included in the year over year change is an approximately 40 basis point negative impact from adjustments to our quarterly reserve for general liability insurance. These adjustments include $3,700,000 of additional expense this year and a $900,000 credit last year. Moving below restaurant margin, G and A dollars grew 23.3% year over year and came in at 4.3 percent of revenue for the Q4. The primary driver of the year over year increase was higher cash and equity compensation. Speaker 100:14:33For 2024, the equity grant enhancement We'll also add approximately $3,500,000 of G and A expense in the second half of the year. Our effective tax rate for the quarter was 10.9%. Our full year 2023 income tax rate of 12.5% was below our guidance due to a lower than anticipated state tax rate and we are updating our expectation for the full year 2024 income tax rate to approximately 14%. Finally, as we reminded everyone last quarter, 2024 is a 53 week year for us. As such, the Q4 will have 14 weeks versus our normal 13 weeks. Speaker 100:15:21We estimate that the additional week could benefit full year 2024 earnings per share growth by approximately 4%. Now, I will turn the call back over to Jerry for final comments. Operator00:15:34Thanks, Michael. There's no question 2023 was another legendary year for Texas Roadhouse and we are looking forward to building on our momentum into 2024. As always, we will be focused on driving sales, controlling costs, taking care of our people and maximizing shareholder value. We are also looking forward to our upcoming Managing Partner Conference in Austin, Texas, where we will be celebrating all of our amazing partners. Additionally, we will be naming our annual Managing Partner of the Year for Texas Roadhouse and our 2nd ever Bubba's 33 Managing Partner of the Year. Operator00:16:17I'm very proud of our accomplishments and even more excited for our future. It's a great time to be a roadie at Texas Roadhouse. That concludes our prepared remarks. Operator, please open the line for questions. Your first question comes from the line of Jeffrey Bernstein from Barclays. Operator00:16:43Your line is open. Speaker 300:16:46Great. Thank you very much. Two questions. The first one, just thinking about the 2024 restaurant margins, It's pretty impressive you nailed the cost outlook in 2023 in terms of the ranges you provided for COGS and labor. If you were to do the same in 2024 and Obviously, you gave us the inflation guidance you expect at this point. Speaker 300:17:06But if you came in within those ranges, can you talk about the potential restaurant margin expansion outcomes or maybe the range of outcomes you or what you think would be the greatest unknowns in terms of that restaurant margin? And then I had one follow-up. Speaker 100:17:19Yes. Hi, Jeff. It's Michael. Thanks for the question. There are a couple of things that you may need to determine on your own and that really relates to the top line growth, how much traffic you want to assume, What pricing we may take in the Q4, but assuming modest traffic growth, modest additional pricing And kind of hitting the midpoint of our range, I do think you have opportunity to see restaurant margin expansion and really the other operating is probably the biggest area for that expansion. Speaker 100:17:56You may also get some labor, you probably would get some expansion earlier in the year And then some of those enhancements that we've talked about may flatten that out. And then your commodities We're probably with the stair step up in the commodity inflation, you're going to see leverage earlier in the year. And again, that's just with the guidance that we've given how it probably would play out. Speaker 300:18:25Understood. So it sounds like both labor and Commodities could be more favorable in the first half less so in the back half? Speaker 100:18:35Yes. I would agree with that as far as how we contemplate the inflation playing out. Speaker 300:18:41Got you. And then just to clarify on the comp strength through the Q4, Pretty stable in October, November, accelerated nicely in December. Is there any change in consumer behavior you're seeing, whether traffic or mix shift, how the consumer spending Even going into the 1st 50 days of this year, I'm just wondering whether you get the sense there's any change in behavior, with obviously a lot of people anticipating a potential slowdown or Whatnot, but I'm just wondering what you're seeing across your portfolio of brands in terms of consumer spending patterns and behavior? Thank you. Speaker 100:19:14Hey, Jeff, it's Michael. Again, I'd say we are very excited about what we're seeing at all of our brands. The Consumer behavior does not seem to have changed in the Q4 or really changed much in the 1st 50 days of the year. And a lot of that can be seen by the traffic growth that we put up. I mean, we continue to see some negative mix in the Alcohol category, I think that's more of an industry behavior than anything directly related to Texas Roadhouse. Speaker 100:19:49But other than that, I think we continue to see guests trading into us from Fast casual or other casual diners, some of those are probably going more towards the value side of our menu, the 6 ounce sirloin and the other lower priced items and maybe they're not they're getting a soft beverage instead of an alcoholic beverage, but we feel very happy with the consumer right now. Speaker 300:20:18Fantastic. Thank you very much. Operator00:20:22Your next question comes from the line of Peter Saleh from BTIG. Speaker 400:20:28Great. Thanks for taking the question. I didn't want to come back to the conversation around the commodities. You've reduced your outlook or at least the inflation outlook just slightly. I assume you guys are Mostly contracted on the first half of the year, so you got some good visibility. Speaker 400:20:45Can you just elaborate a little bit on really what you're seeing there and what really caused you to kind of take that down, albeit modestly? Speaker 100:20:53Yes. Hey, Peter, it's Michael. It really had to do with, you're right, the first half of the year, What we were seeing in the Q1 and some of the expectation of what will continue the next several months. And we do then think that tightening really starts to have a bigger financial impact on the industry in the back half of the year. So the change was largely because of the beef outlook in the earlier months. Speaker 100:21:25You are correct. We have a certainly in the Q1 a good amount of our beef and our commodities locked. It becomes a smaller percent as we move further out for competitive reasons, probably not going to get into much more detail as to what percent locked. But again, our beef experts are picking and choosing their moments as to when to lock in and when it's better to be on a formula basis. Speaker 200:21:50And Peter, this is Chris. I'll just add to, I talked last quarter about the other part of our basket is helping to offset the beef inflation. That's continuing. So we're certainly seeing that. But everything Michael just told you about our situation with beef is continuing. Speaker 400:22:09Great. Thank you. And then just on the CapEx, I know $340,000,000 to $350,000,000 I recognize that is obviously much higher than was several years ago. Can you just help us out in terms of what's really changed over the past couple of years? I know you said your The restaurants are a little bit larger, so that's adding some more to the expense. Speaker 400:22:32Are you also doing any bump outs this Any other renovations that we should be aware of that are kind of driving that number that high? Speaker 100:22:42Yes. Hi, Peter, it's Michael. I mean, we certainly will be doing bump outs like we have done in past years and other Remodels, those higher numbers really are reflection of the inflation that Equipment and labor has seemed to get work done over the last several years. Coupled with we're now an older base of restaurants than we were before and we're busier than we've ever been. So we have equipment That needs to be replaced and getting work done, whether that be building a new restaurant or bumping out an existing restaurant cost more than it did in the past. Speaker 100:23:26So that's really what has driven those costs higher. Yes. Speaker 200:23:32And the only thing I would add to that again is Chris. The only thing I would add to that is our investment in some technology like Jerry was talking about the 200 restaurants we're going to put Digital Kitchen in. So that will add as well. But those are all investments we feel really good about paying off in the future. Speaker 400:23:50Thank you very much. Operator00:23:53Your next question comes from the line of David Tarantino from Baird. Your line is open. Speaker 500:24:00Hi, good afternoon. I had a couple of questions about the pricing philosophy and the margin outlook. So I guess first, with the price increase you're planning in March, it does look like the total pricing that you're taking this year is going to be pretty closely matched up with inflation. And I think in the past, The philosophy has been to perhaps under price versus inflation. So do I have that right? Speaker 500:24:30And then if so, is this a change in your philosophy on how you're managing margins going forward? Operator00:24:39Well, I think we have always taken a conservative approach in how we look at it throughout the country and maintaining value in our menu. So when we gather with our operators and really talk over about mandated wage increases and different things that will affect their business. We still want to have a competitive mindset as we go into keeping our value built into our menu and making sure that we're also keeping value for our consumer in place. Michael can talk to a little bit on the numbers from that. Speaker 100:25:12Yes. I think, David, what I would mention is, it definitely is not a change in our philosophy. We've always said, we want to be pricing for the structural component of inflation, which is largely wage inflation, but that doesn't mean that we're always pricing for all of it as soon as we're feeling it. So Some of the pricing that we are taking now is to offset wage pressures that we have felt over the last several years as we continue to manage That labor line both through productivity efforts, but the reality of the higher wage rates that we're paying. So Definitely not a change of philosophy, still going from a bottom up approach of talking to each operator and making sure they are absolutely in alignment with what we're doing. Speaker 500:26:01Great. That's a helpful explanation. And then on the commodity outlook stepping up in the second half, does that sort of give us Some visibility into next year and that maybe the beef costs or whatever commodity costs are accelerating, I assume it's beef, Could you could have a carryover impact from that as you look into next year? I just want to understand how to think about that. Speaker 100:26:30Hey, David, it's Michael. I would say it's a little early for us to give you any thoughts on what this could mean for 2025. But The industry reports out there, obviously, are calling for tighter supply into 2024 and as of yet not hearing Much relief coming in the future, but a little early for us to be able to give you any true thoughts about 2025. Speaker 600:26:58Great. Thank you. Operator00:27:02Your next question comes from the line of Dennis Geiger from UBS. Your line is open. Speaker 400:27:08Great. Appreciate it. Wondering if you could talk Speaker 700:27:10a little bit more to sort of thinking about the labor situation as it relates to labor relative to traffic for 2024, does that look more like the historical relationship? Might you look better Then the historical relationship, maybe if you could just kind of touch on what that looks like and perhaps how digital kitchens and tech more broadly maybe able to help out from that perspective? Speaker 200:27:35Hey, Dennis, it's Chris. Yes, I'll start. I mean, I think we were really encouraged in the 4th quarter, our labor hours grew less than 50% of traffic growth and that was it's been difficult to achieve since the pandemic. And so, there's a focus by our operators on that line item. And the fact that we have Employees staying with us, our turnover is at or better than it was pre COVID. Speaker 200:28:04And all of those things provide some encouragement on that particular line item. But again, to have achieved it in the Q4, We're projecting that we can do it again in the Q1. And so I think all that's very positive. And I'll speak to Operator00:28:19the Digital Kitchen. This is Jerry. We've opened all of our new stores open with the digital kitchen this year. We converted 20. We've really been talking Strategically about how to get the whole Roadhouse concept on that digital kitchen format because of the many benefits that we see not only for the commotion in the kitchen itself, but even the ability to track our cook times and so many features that we believe will enhance Our experience for our employees in the back of the house and it will impact in a positive manner the cook times for our front of the house table turns. Operator00:28:56So The digital kitchen is a huge commitment. The feedback from our operators has been incredible and the demand and desire is there. So The number is a pretty big number for us, but we've got a great game plan. And I think strategically, we're going to execute at a high level To do that, all of Jagger's and Bubba's already on the digital kitchen format. Great. Operator00:29:18Thanks guys and congrats again on the results. Thank you so much. Your next question comes from the line of Sara Senatore from Bank of America. Your line is open. Speaker 800:29:30Hey, thank you. Just two clarifications. The first is on the labor point, you made the point that you grow hours less than traffic. I guess I was under the impression that maybe as we think about fiscal 2023, you were kind of getting to full staffing over the course of the year across most of the restaurants. So while your wage inflation maybe was highest in the first half, Yes, maybe your hours were not. Speaker 800:29:57And so I was just curious if that if there is sort of an opportunity in the second half of this year to maybe have more labor leverage from that perspective even if wage inflation is perhaps more moderate And whether the technology may also contribute to that. So that was the first clarification, just sort of the staffing approach through 2023. Speaker 100:30:20Yes. Hey, Sarah, it's Michael. Yes, I do think what Chris talked about that those labor hours growing at less traffic is something that could certainly continue into Q2 and into Q3 and into the Q4 as well. Our operators are focused on that productivity. People are staying around longer. Speaker 100:30:47So that is certainly an expectation or something that we are going to be working all year long, getting that better productivity on the labor hours. Speaker 800:31:00Great. Okay. Thank you. And then the question was about, your mix has been very consistent, just modestly negative, even though we seem to be keep hearing that The industry is getting more focused on value. So are you seeing anything that would suggest that your relative value proposition is That gap is narrowing or people are making different decisions just because it doesn't appear to be showing up in your comps at all, but curious on your thoughts on that. Operator00:31:28Yes, I think just like to your point, it's not showing up glaringly for us either. I think our value has always been built into the menu and The consumer feels very good about our offerings and from that standpoint, whether it be our steak or our chicken or all of our offerings are country dinners. We feel very good about where we're placed, but we don't see anything to indicate that there's a lot of movement within that menu pricing. Speaker 800:31:54Thank you. Operator00:31:56Thank you. Your next question comes from the line of David Palmer from Evercore ISI. Your line is open. Speaker 900:32:04Thank you. And amazing quarter to date comps, really amazing comps. Operator00:32:10Thank you so much. Speaker 900:32:12I wanted to ask you about KDS. You just commented a little bit about some of the things that it does for you. And The good news, I guess, is that you're not you don't have to be pioneers on KDS. You've seen it in some of your brands already. Can you maybe give us a sense of what it can do to the metrics that the Wall Street Nerds would be following, Comps, margins, things like that, maybe even this is something that will help you on that labor leverage where you might be able to add less hours because of table turns and you make the shift work better, I don't know. Speaker 900:32:48But is there any metrics that you could share what it does for you? Operator00:32:53Well, David, thanks for I think that this is Jerry. The benefit for us is really about the efficiency of the overall kitchen. And the way that the digital kitchen organizes through the screens versus through the tickets creates a lot less chaos, I guess, you could say. There's no doubt we can track our cook times. There's some real positives from that side of it as we've already seen. Operator00:33:17And again, we're only 40 or 50 in, but we are very Committed. Every indicator that we have and Michael will talk to your Wall Street nerd thing. But I will just talk to you as a kitchen guy. What I see in those kitchens is communication, consistency. It just organize it so people don't stress out when You got a whole bunch of tickets in front of you and all of that and we can clearly monitor how long our cook times are. Operator00:33:44So that will be a big win for us going forward. And then think Michael has a couple of comments. Speaker 100:33:48Yes. Thanks, Jerry. Yes, I do think again that calmer kitchen does lead to a happier Rody, who has been less likely to seek other employment, so maybe your turnover improves because of that and you're keeping that efficient productive employee for longer. But as far as what it may do to the front of the house, I think we have found that the digital kitchen does time the food out a little bit better. So maybe Those salads get out as an appetizer to the guests a little bit quicker and the entrees are getting out there a little bit quicker. Speaker 100:34:28So You couple that benefit with our Roadhouse pay, our pay at the table system, which is speeding up The check and change portion of the dining experience and then maybe At the guest's discretion, you have shortened the table turn time and which allows you to quote a shorter wait time to that next guest. So By the end of the night, maybe somebody who was previously being told they could be sat at 8:30 is now being told 8:10 or 8:15 and that may make all the difference and their willingness to stay and us getting another table turn out of in the restaurant. Speaker 900:35:10And is this something that you'll ramp the deployment of? I know you wait for it to be pulled, but I Would imagine at this point that it's being pulled heavily. I mean, how fast can you roll these out? Can this be done by the end of 2025, for example? Any sense of that? Operator00:35:28Well, I think we're going to try to get through this year and see how these 200 go. And then obviously the intention is to get the whole concept done. I think it might Take a little longer than that, but we want to do it strategically and we want to execute at a high level for our partners. So, we'll be as fast we possibly can because we're committed to it and believe in it, but I don't want to put a date on it yet. Speaker 900:35:51Thank you very much. Operator00:35:53Thank you. Your next question comes from the line of Jeff Farmer from Gordon Haskett. Your line is open. Speaker 700:36:00Thank you. Just some quick modeling follow ups. Assuming the 2.2% menu pricing takes place in March, What would Q1 and Q2 menu pricing be? Speaker 100:36:12Sure. Hey, Jeff, it's Michael. And again, That pricing will go into effect our 1st day of our Q2. So for The Q1, you won't get any benefit from it, but we'll have between 4.8% and 4.9% pricing in Q1, And we'll have basically the same thing in Q2 and Q3, about 4.8% to 4.9% for both those quarters. And obviously, if we didn't do anything in the back half of the year in the Q4, we would only have the 2.2% in Q4, but we'll reevaluate what's appropriate as we get later into the year of what we may want to add on to that. Speaker 700:36:54Thank you. And then now weather impact on the quarter to date same store sales in the Q1, did you share that? Speaker 200:37:01Yes, that's this is Chris, Jeff. January, we had and we talked about that in the prepared remarks, but January had 2 Really tough weeks, and it impacted the guest counts by about 2.5%. And so if you take that extrapolated into the 1st 50 days, we were down about 1%. So the 3% growth that Michael shared with you, if you take that weather out, would have been 4%. So there was a lot to be proud of in 1st 50 days and our operators, they slog through those 2 very difficult weeks and took care of the customers that were able to show up and serve them well, but it was a great first 50 days in spite of those 2 weeks. Speaker 700:37:53It was definitely. And just last one for me. Q4 check, I think you shared was 4.8%, but just some quick breakdown of pricing and mix for the Q4? Speaker 100:38:05Hey, Jeff, we had 5.5% pricing in Q4. So therefore, we had about 70 basis points of negative mix giving us that check up 4.8. Speaker 1000:38:15All right. Thank you. Pass it on. Operator00:38:19Your next question comes from the line of Lauren Silverman from Deutsche Bank. Your line is open. Speaker 1100:38:25Hi, thanks and congrats on the results. I wanted to ask first just on the other OpEx. It's been growing pretty steadily even if you exclude some of the one time items that you talked about. Can you just Help us understand how to think about OpEx growth or on the other OpEx side in 2024? Speaker 100:38:49Hey, Lauren, it's Michael. Thanks for the question. You are right that those even though we did get some been getting some leverage Overall on that line, it is the underlying pressure has remained and there are a lot of inflationary items in there, a lot of services in there. But your repair and maintenance cost is a big one on top of the general liability, Insurance costs, even absent some of the reserve adjustments we've had. So moving into 2024, I do think that on a dollars per store week, you will continue to see an increase, but it should not be At the rate that we have seen, probably you probably start a little bit higher in Q1, but mid single digit Growth in those dollars per store week and then maybe coming on a little bit from that as you move through the year. Speaker 100:39:46That's obviously without knowing what other kinds of reserve adjustments we may have or not have, but with what we know right now, that would be my expectation. Speaker 1100:39:58Great. Very helpful. On the to go side, you saw sales per week accelerate, it looks like throughout the year in terms of growth. Can you just provide a little bit more color on what you're seeing on that to go side? And why you've seen, I guess, positive growth at least over the last three quarters now? Operator00:40:17Yes, I'll start off. I just really believe that it's our ability to execute full dining rooms and continue to keep the level of service through our to go experience. So I think as our operators have gotten used to that volume at the high level that we are at, it has allowed us to continue to take more orders and be more available to our guests. Speaker 200:40:37Yes, this is Chris. I'll just add on. I mean, and I know you watch us every quarter, but you saw that It sort of spiked during the pandemic, then it began to come down over time and now it is kind of coming back up again. So This is just to Jerry's point. Our folks know how to execute it and it's definitely a popular thing for our guests. Speaker 200:40:59So we're looking forward to continuing to see that do well over time. Speaker 1100:41:06Great. And just last one for me. Can you just clarify, and I appreciate the color and all the quarter to date, what you're running in terms of comp as the weather Just to clarify. Speaker 100:41:20Sure, Lonnie. It's Michael. So within that 50 days, I guess I can tell you our January comp was a 4.2% and then the last 3 weeks plus a day was a little over 10%. Speaker 1100:41:42Appreciate all the color. Operator00:41:46Your next question comes from the line of Andy Barish from Jefferies. Your line is open. Speaker 1200:41:53Hey, guys. Most of my stuff has been asked. Just, could you quantify in the 4Q sort of the holiday benefit of the And then the Lenten season is upon us and started a week earlier for 1Q. Any commentary around that for the rest of the quarter? Or is it kind of minor? Operator00:42:18Hey, Andy. How are you doing, bud? Listen, I can the Q1, obviously, we just had Valentine's Day yesterday, which gives us a great indication that we're often running strong and solid. So that's hard to all the other things that you asked about I do know we have some promotional stuff going on at JAGGERS, but I think right now without the weather, the momentum is very solid into the Q1. Speaker 100:42:43And Andy, it's Michael. I don't know if I have any numbers at my fingertips regarding the benefits around the holidays. We definitely Saw some benefit in that timeframe, but I'm not going to be able to put a number on that right now. But Again, the numbers we've been putting up go beyond just a couple of days With the calendar shift, we've saw strain for quite a while. Speaker 1200:43:12Understood. And Operator00:43:13then just circling back on the Speaker 1200:43:15CapEx With the 200 digital kitchen conversions coming in, but total CapEx staying the same, what's the offset there where there's some idiosyncratic things that kind of hit last year or how should we think about that, staying flat, although Clearly spending some more capital on this on the KBS. Speaker 100:43:41Yes. Andy, without getting too much into the details, it's fair to say that our initial estimate that we put out there gave us some room, some wiggle room for other projects and things to come in there And the acceleration of the digital kitchens filled some of that space. So, again, We left ourselves some room for that. So it was not that we did this and had to replace it with take something else out. Speaker 200:44:14Yes. And I'll just Andy, it's Chris. I'll just add into that. I mean, it's about $45,000 a store to put the KDS in. And so You're talking about roughly $9,000,000 and on that big of a budget, we can find a way to get it in there. Speaker 1200:44:31Great. Appreciate the detail. Thank you. Operator00:44:35Thank you. Your next question comes from the line of Chris O'Cull from Stifel. Your line is open. Speaker 600:44:42Hey, thanks. Good afternoon, guys. Jerry, are you seeing any signs that are growing that a number of your restaurants may be getting closer to capacity during peak hours? I'm just wondering if you're seeing a need for additional bump outs or maybe any other approach that could increase sales headroom? Operator00:45:00Yes. Chris, thanks for the I think the bump outs and we're doing cooler expansions, which really that's part of what the costs are is giving these folks that are really serving A lot of guests is really more storage in the back to be able to get more food in their building. The upside to even at our elevated average unit volume at over We've got a large group of restaurants that are doing significantly more than that. And so as I've said in the past, they're the ones leading the way that show us that even our average unit volumes can increase year after year if we continue to execute and do the things that our operators need to be able to get more people through their building and there's definitely a demand there. We just got to continue to execute, more people, more product and we'll be just fine. Speaker 100:45:51And Chris, this is Michael. I just want to add on to what Jerry said, which I think is quite impressive. Those highest volume restaurants, The ones that are above average or well above average continue to comp at or at least at the average, if not better than average, And that certainly happened throughout 2023. So we haven't seen those busiest restaurants Come up against a wall as far as growth. So that gives us quite a bit of confidence for even our the room that our average stores have for future growth. Speaker 600:46:25That's impressive. And then could you provide some additional color around what unit economics you're targeting at Jaggers? And then maybe how many development commitments that you have right now for JAGGERS? Operator00:46:40Yes, go ahead, Michael. Speaker 100:46:41Yes. Chris, it's Michael again. I would say it's a little early for us to get into specifics on returns. Clearly, we have a couple of franchisees already who have opened stores and will be opening more stores. So I don't want to put words in their mouth, but I would say they are pleased with what they are seeing and there are continued conversations with future partners as well. Speaker 100:47:07So not going to get into returns either on the company side or the franchise side, but We are very pleased with what we are seeing and what we believe Jaguars can do going Operator00:47:19forward. Great. Speaker 600:47:22Thanks guys. Speaker 1300:47:23Thank you. Thanks Chris. Operator00:47:26Your next question comes from the line of Andrew Strelzik from BMO. Speaker 1400:47:33Good afternoon. Thanks for taking the questions. I was hoping you could start maybe by giving some color on Bubba's. I know you've done a lot of work on the brand over the last 2 years or so. So where are you seeing progress or other areas that need more work opportunities, Thoughts around where Bubba's is today would be great. Operator00:47:52Yes. Thank you, Andrew. I feel really good about Bubba's. We've put a lot investment in the last couple of years, not only on the people, getting the right people, the leaders, the support all the way around it. We've done some, what I think are really solid structural parts of the building to keep the cost down, and we see our sales growing. Operator00:48:12So all of the indicators are that people are loving the food with the burgers and the pizzas and the energy that we have with our rock and roll. But I think the biggest thing is about having leadership, having consistency and the ability to execute and people identifying who Bubba's 33 is. So all indicators are very positive and we're very happy with the continued progress that Bubba's is making. Speaker 1400:48:37That's great to hear. And then just following up on some of the commodity inflation or food inflation outlook. You noted the kind of more modest increases in the first half of the year and then a step up in the back half. Can you be a little more specific kind of either front half, back half or by quarter kind of how you're expecting that to progress? Yes. Speaker 100:48:57I mean, hey, Andrew, it's Michael. I'd say Q1 is definitely Our expectation to be at the low point where maybe you're in the 2% to 3% inflation range and then it grows From there, and I don't know necessarily have any that the Q2, 3 and 4, That's dramatically different than each other. It is a stair step up certainly from probably Q2 into the back half, But that Q1 is really the one that stands out as being a little bit lower. Speaker 1400:49:34Okay. And maybe if I could just Squeeze one more in. A question on buybacks and your appetite there. You noted paying off the last bit of the debt there, I know the CapEx is going to be up, but I'm just curious your appetite for share repurchases at this point for 2024? Thanks. Speaker 200:49:51Yes, Andrew, it's Chris. Look, our operating cash flow and our balance sheet are major advantages for us. And so we are going to continue to take this balanced approach over the long haul like we have. And you saw the increase to the dividend that our board approved with Jerry and that we're happy to have that out there. And we'll look at share repurchases. Speaker 200:50:15Obviously, the first place we go is to think about bringing in the dilution. But As we have opportunities to continue to invest, we'll look at that first. But then if there is Cash left over, we're going to be looking at continuing the share repurchase program. Speaker 1200:50:34Great. Speaker 1400:50:34Thank you very much. Operator00:50:38Your next question comes from the line of Gregory Francfort from Guggenheim Securities. Your line is open. Speaker 1500:50:45Hey, thanks for the question. I had 2 quick ones. Speaker 1300:50:49The first is just I know Speaker 1500:50:50you answered the question on capacity earlier. I'm curious your appetite to maybe accelerate unit growth beyond that kind of 5% to 6% range. I mean, you guys are running really healthy traffic and I'm Wondering if you what would it take to maybe expand that pace of unit growth a little bit? Operator00:51:08Well, thank you. It's important for us to keep a cadence of how many openings that we can do a year and be balanced in our approach. And we have to do it right. We have to get every store opened With incredible energy, it takes a lot of folks inside. So we like our number of what we're doing for Roadhouse and the other two brands. Operator00:51:27So You'll probably see us stay very close to that. If we get an opportunity to increase a couple of here and there, we might take that opportunity. But I don't think we're going to change our overall strategic goal or game plan on growth. Speaker 1500:51:41Got it. And then just maybe, I may have missed it earlier, but Any thoughts on where the turnover environment looks like or the quit rates or what that might be doing to your training and ability to train Any thoughts on the labor market would be helpful. Operator00:51:58Yes. Thank you. We feel really good. We put a lot of work into it in the last couple of years. And We look at it 3 levels, our managing partners, our managers and our roadies. Operator00:52:09And all three of those indicators are that turnover is coming down, which also means that we're getting more reps and running these shifts that are at a higher volume. So all of those indicators are pretty solid. There are folks Applicant flow has been pretty solid for us. So from that standpoint, the work and the effort that we put in has really benefited. I think we're creating an environment where our employees want to work and be a part of something that's really special. Operator00:52:35So, I believe it's a very positive environment out there and we are benefit. The longer our folks can stay around and we keep Roadie Nation happy, they're going to keep taking care of us. Winners win. Yes. Thank you, guys. Operator00:52:52Your next question comes from the line of Brian Vaccaro Speaker 1500:53:00Just circling back on the topic of table turns and ROADY pay, etcetera. And I guess tying it into comps a little bit, obviously, your comps have been impressive for a long time now. But I'm curious as you dig into your Tom, it's a little bit. Are you seeing outsized growth or even maybe a little bit of an acceleration in peak demand periods that you might be able to tie back to table turns or more broadly, are there any other daypart or regional differences in your recent trends that might be worth highlighting? Speaker 100:53:31Yes. Hey, Brian, it's Michael. Good to hear from you. Some of that is a little difficult to parse out, But I can tell you, geographically, we are seeing similar results across the country. By age of our restaurants, we're seeing similar results. Speaker 100:53:54And then as far as the day part, We are seeing a little bit more strength earlier in the day and into the power what we call the power hours at 6 to 8 o'clock timeframe. So whether that's coming from the technology investments, hard to tell you, but we're certainly Doing everything we can to give that guest a good experience, give them the opportunity to get in and get out at their pace. And I think that's what we'll continue to focus on going forward. Speaker 1200:54:33All right. That's helpful. Thank you. Operator00:54:36Your next question comes from the line of Brian Harper from Morgan Stanley. Your line open. Speaker 500:54:44Yes, thanks. Maybe just one for me, Michael or Chris. What do you have any view on kind of G and A this year either in growth terms or percent of sales as you think about leverage there? Speaker 100:55:00Hey, Brian, it's Michael. Yes, G and A as a growth company, we're going to continue to invest in our people, in our systems. I think our philosophy remains the same that we would like to see those G and A dollars grow less than revenue growth and continue to see if we can to see if we can get some leverage there, but we were at 4.3% of revenue in 2023. That's come down significantly from where we are. So we'll see what happens in 2024. Speaker 100:55:31I can tell you that You probably would see in Q1, I think we have the most opportunity to not see a lot of increase, but then after that, you will start to see some increase. Again, being a 53 week year, You could see us having the need to accrue for additional bonus compensation and then again you would then lap that into 2025. And we talked a little bit about some of the equity compensation enhancements that we've made and that will impact second half of the year. So I think you'll continue to see those G and A dollars grow and maybe it's not a year where we get a lot of leverage. Some of that will Depend upon what the top line ends up doing, but yes, definitely investments to be made in the business. Speaker 1200:56:30Thank you. Operator00:56:33Your next question comes from the line of Jim Sanderson from Northcoast Research. Your line is open. Speaker 1600:56:39Hey, thanks for the question and congratulations on a great quarter. I wanted to go back to the mix issue. It seems to me that's improving not as negative as it has been. Do you expect that to pretty much iron itself out, so to speak? And is there an opportunity to actually see that become an upsell opportunity to make that positive as we go into the back half of the year. Speaker 100:57:01Hey, Jim, it's Michael. I mean, you are correct, Q4 with the 70 basis points was A little bit less than what we haven't seen in the last couple of quarters. There were a few things in there that benefited us in the Q4 around the holiday time. You see maybe an increase in bread sales and the such that can offset some of some other areas. It will be something we'll be watching here into 2024 whether that trend continues. Speaker 100:57:34Entrees, again, if we continue to see people trading into us and growing our traffic, but maybe they're hitting the value side, You could have a little bit of negative mix there. And that alcohol is a little bit of a question mark. I'll be honest with Will that flatten out or just kind of the societal trends right now of I think a little bit less alcohol sales You may stay with us. That's just one we'll have to wait and see what happens on. Speaker 1600:58:06Okay. So probably a little bit of Headwind going forward, just not Speaker 100:58:10as bad. Is that the right way to look at it? It's a hard one to fully answer, but I think in The economic consumer environment we're in, it would not surprise me for it to be a little bit of a headwind. But again, It's one that until you really see what's going on, it's hard to fully predict. Operator00:58:32All Speaker 1600:58:32right, understood. Thank you. Operator00:58:35Your next question comes from the line of Rahul Kratupalli from JPMorgan. Your line is open. Speaker 1000:58:42Thanks for taking my question guys. I just wanted to follow-up and expand a bit more on Bubba's. Can you discuss the store margin growth year on year and help us get some confidence in the longer term store margin profiles for this concept. Is there a potential for this to be At or above Roadhouse, can we expect an inflection at some point? Or are there any structural costs like prime cost for this concept lower versus Roadhouse as we go forward? Speaker 1000:59:10And I have a follow-up. Speaker 100:59:13Hi, this is Michael. I can answer some of that, but I'm can give you all the information that you're maybe looking for. I can tell you, we feel very good that Bubba's can generate those Mid teen returns that we're looking for, we believe Bubba's can generate a very strong restaurant margin. Your point of can they be in line with Roadhouse, if they were doing similar sales volumes, yes, absolutely that is But the reality is Roadhouse performs at a higher level than Bubba is in a higher level than most restaurant concepts. So that is going to benefit Roadhouse from a margin perspective. Speaker 100:59:58But the menu items that we have at Bubba's would lend itself to a very strong margin as compared to Roadhouse on similar volumes. I think that's about as far as we're probably going to go on that one right now. Speaker 1001:00:14That's helpful, Mike. Thanks for that. And on the follow-up, I know you guys talked about having a total 900 stores TAM for the company as a whole. And I think like Roadhouse was targeted at 700 to 8 100 over time. I know you guys discussed a lot of new like the digital kitchens, like new store formats and whatnot. Speaker 1001:00:33I'm just Curious if there is an updated thought on this number and how you are looking at this going down the line? Yes. Operator01:00:41Thank you. We believe that's a great target for us. We adjusted that I believe just a little over a year ago Through a lot of research and just thinking about our business going forward, so there's no adjustment to that number now. We're still focused on being responsible to all of our partners out there, but we believe we can get to that number. Speaker 1001:01:02Perfect. Thanks, guys. Operator01:01:04Thank you. Your next question comes from the line of Jon Tower from Citigroup. Your line is open. Speaker 1701:01:11Great. Thanks for taking and hanging in there. Just real quick, first on the G and A side, the grant changes that you're talking about in the second half of twenty twenty four, I'm assuming those are not one time in nature and something that will carry So just wanted to first confirm that? Speaker 101:01:29It's Michael. On the G and A side, those are a little bit more One time in nature, it's really an acceleration of the grants. So we'll still be expensing grants that we've been given quarterly over the last several years and we will now be pulling up and granting all at one time, some grants that would have been happening over the next several quarters. So you'll we'll feel that One time in Q3, Q4 and then some into the beginning of next year, the majority of it will then not have an impact on us after that. Speaker 1701:02:12How about the labor line that you had mentioned earlier as well? Speaker 101:02:16The labor line is more of is not as much one time in nature. While you do have that acceleration going on the other enhancements of us increasing the amount of grants to some Store level employees is part of it, but also including additional manager levels in the granting of Equity compensation. So that is one that will stay with us going forward. Speaker 1701:02:46Great. Thanks. And then just curious, Your business has obviously got very strong demand from a traffic standpoint. And I know you've had some success earlier in terms of expanding some of the early dine options during the weekdays, I think you since COVID added about an extra hour or so to that during the weekdays, if I'm not mistaken. So curious, do you feel like there's more opportunity perhaps extend that further? Speaker 1701:03:13I think it's mostly 3 p. M. To 6 now. Could you push it further to 2:30 or 2 o'clock or is that just something that kind of not contemplated today to meet that demand? Operator01:03:27Yes. Thanks, John. I think it really is open to a 5:30 or 6 So if they open at 2:30, 2:45, but most of the stores are opening at 3 o'clock. So as soon as they open that early dine kicks in. I think that's where we'll stay For now, I don't see us getting any earlier than that, but might be a few out there. Operator01:03:47Great. Thanks for the time. Thank you. Your next question comes from the line of Jake Bartlett from Truist Securities. Your line is open. Speaker 101:03:58Great. Thanks for taking the question. Speaker 1301:04:00Mine is about development. First, maybe a clarification. You said today that you expect to open or you continue to expect open 30 company owned stores across the 3 brands. My reading of the last earnings call was that it was 30 with Texas Roadhouse and Bubba's, but then 3 Jaggers. But just to confirm, is there any change in the company owned development outlook in 2024? Operator01:04:25Jake, I don't think there's any change at this time. We're definitely after the massive amount of openings we had in the last 4 months of 2024, we are trying to strategically spread that out a little bit. But as of right now, we are focused on that number between the 3. Speaker 101:04:41Yes. And I would just Jake, this is Michael. It does say approximately 30%. So we just put all of those into there. The Jagger's timing, whether we get 3 open, we will see and those could be later in the year, but we just felt It was cleaner to give you all that number all in one. Speaker 1301:05:05Got it. And you also mentioned that the cadence to be more balanced over the year. Maybe if Speaker 101:05:11you could dig into that Speaker 1301:05:12a little bit, maybe comments on the development environment, the headwinds we've been You're in the balancing for 3 or 4 years now. Is that are you starting to see signs that that's easing and that's what gives you more confidence in a kind of evenly spaced development in 2024? Speaker 201:05:31Yes, Jake, it's Chris. And I think we are seeing that smoothing out a little bit. And Jerry oversees our development team himself. And so that's something he may want to speak to. But I will say that A lot of the jurisdictional issues, the permitting issues, things that you've been hearing from us and others are largely behind us. Speaker 201:05:53There are still occasional problems in the supply chain, but for the most part, we're getting work done, although at a higher cost. And so that's definitely seems to be with us as we go. But we do feel good about the way that we've got this we're calling this cadence that we've built And we feel very good about that as it's flowing through. I don't know if you had anything you wanted to add, Jerry? Yes. Operator01:06:16Thanks, Chris. Just as a matter of the lot of work been put into this timeline and building in that what the times that it takes to get all of these set up and then we can make the decision. So I think there's been a lot of work and effort. It's looking really good right now for 2024 and 2025 and we really want to keep that cadence going forward. It takes a lot of pressure off of our crew to get the most of the openings in the first three quarters versus jamming everything into the Q4. Operator01:06:42So we've been working really hard on that and we're going to keep trying to keep that cadence going forward. Speaker 1301:06:48Great. And then last little kind of nitpicky modeling question. If I look back at the extra operating week in 2019, Q4 of It was about a 60 basis points benefit to restaurant margins. Is that where we're getting the 4% impact for the year when math could tell you 2% for an extra week. But is that about right, the 60 basis points boost in the restaurant margins and that's really where the outsized earnings from that week comes from? Speaker 101:07:15I mean, Jake, it's Michael. I don't have the numbers right in front of me for this call, but certainly you are getting margin expansion that as part of the reason why you're getting 4%, an estimated 4% benefit for approximately 2% increase in store week. So probably as much as I can give you on that. Some of the benefit does come outside of restaurant margin as well, but there is a benefit There surely is a benefit in there from that high volume extra week. Speaker 1301:07:54Great. I appreciate it. Thank you. Operator01:07:59This concludes our question and answer session for today. I would like to turn the call back to Jerry Morgan. Thank you and all for being on our call tonight. And to Rode Nation, yeehaw to an incredible year. Thank each and every one of you. Operator01:08:15Let's go. This concludes today's conference call. Thank you for attending. You may now disconnect.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallTexas Roadhouse Q4 202300:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsPress Release(8-K)Annual report(10-K) Texas Roadhouse Earnings HeadlinesBrokerages Set Texas Roadhouse, Inc. (NASDAQ:TXRH) PT at $194.62April 26 at 2:01 AM | americanbankingnews.comTexas Roadhouse Secures New Credit Facility AgreementApril 25 at 5:19 PM | tipranks.comHere’s How to Claim Your Stake in Elon’s Private Company, xAII predict this single breakthrough could make Elon the world’s first trillionaire — and mint more new millionaires than any tech advance in history. And for a limited time, you have the chance to claim a stake in this project, even though it’s housed inside Elon’s private company, xAI.April 26, 2025 | Brownstone Research (Ad)Texas Roadhouse Vs LongHorn Steakhouse: Which Has The Best Baked Potato?April 25 at 12:07 AM | msn.comWells Fargo & Company Has Lowered Expectations for Texas Roadhouse (NASDAQ:TXRH) Stock PriceApril 24 at 2:53 AM | americanbankingnews.comTexas Roadhouse price target raised to $179 from $178 at BarclaysApril 23 at 11:37 PM | markets.businessinsider.comSee More Texas Roadhouse Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Texas Roadhouse? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Texas Roadhouse and other key companies, straight to your email. Email Address About Texas RoadhouseTexas Roadhouse (NASDAQ:TXRH), together with its subsidiaries, operates casual dining restaurants in the United States and internationally. It also operates and franchises restaurants under the Texas Roadhouse, Bubba's 33, and Jaggers names in 49 states and ten internationally. 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There are 18 speakers on the call. Operator00:00:00Good evening, and welcome to the Texas Roadhouse 4th Quarter Earnings Conference Call. Today's call is being recorded. All participants are now in a listen only mode. I would now like to introduce Michael Balan, Head of Investor Relations Speaker 100:00:32Thank you, Rob, and good evening. By now, you should have access to our earnings release the Q4 ended December 26, 2023. It may also be found on our website at texasroadhouse.com in the Investors section. I would like to remind everyone that part of our discussion today will include forward looking statements. These statements are not guarantees of future performance and therefore undue reliance should not be placed upon them. Speaker 100:01:01We refer all of you to our earnings release in our recent filings with the SEC. These documents provide a more detailed discussion of the relevant factors that could cause actual results to differ materially from those forward looking statements. In addition, we may refer to non GAAP measures. If applicable, reconciliations of the non GAAP measures to the GAAP information can be found in our earnings release. On the call with me today is Jerry Morgan, Chief Executive Officer of Texas Roadhouse and Chris Monroe, our Chief Financial Officer. Speaker 100:01:37Following the prepared remarks, we will be available to answer your questions. In order to accommodate everyone that would like to ask a question, We kindly ask analysts to please limit yourself to one question. Now, I would like to turn the call over to Jerry. Operator00:01:53Thanks, Michael, and good evening, everyone. 2023 was another great year for Texas Roadhouse. We generated over 4.6 $1,000,000,000 in revenue and increased average unit volumes to over $7,600,000 at Texas Roadhouse. And for the full year, comp sales grew over 10% with more than half of that increase coming from higher guest traffic. Along with this top line growth, we also reported double digit increases in restaurant margin dollars, income from operations and earnings per share for full year 2023. Operator00:02:34Our results clearly reflect the commitment our managing partners have in taking care of their guests and their communities. There are no better examples of this passion than our Veterans Day celebration and our national fundraiser to benefit tinnitus research. On Veterans Day, we honored nearly 700,000 veterans by providing a free meal or voucher for a future meal. And just over a week ago, we raised over $925,000 for the American Tinnitus Association in honor of our late founder, Kent Taylor. These are just 2 of the many ways our operators give back to their local communities. Operator00:03:192023 was a record year for system wide new store openings. For the full year, we opened 30 company restaurants across all brands. And our franchise partners opened 15 restaurants, including our first two franchised Jaggers. For 2024, we continue to expect to open approximately 30 company owned restaurants across the 3 brands. Our expectation is that this year's openings will be more evenly distributed throughout the year as compared to last year when 50% of our openings occurred in the last 4 months. Operator00:04:00Additionally, we expect our franchise partners We'll open as many as 14 international and domestic locations, including 4 Jaggers. In 2024, we will also maintain our emphasis on operational efficiencies and improving the guest and employee experience By focusing on technology investments, based on positive feedback from our operators, we're accelerating the number of digital kitchen conversions to be completed this year. We now expect to convert approximately 200 existing Texas Roadhouses to a digital kitchen in 2024. And we have also standardized this equipment for new openings at all three brands. We are also focused on increasing guest awareness of our digital platform, which is the most efficient way for our guests to put their names on the waitlist to dine in our restaurants and to place their to go orders. Operator00:05:01In closing, We are extremely excited about the direction of our business and our 3 brands. There are so many things to be proud of, But at the same time, we still have many opportunities to continue building our business going forward. Now Chris will provide some thoughts. Speaker 200:05:21Thanks, Jerry. 2023 was certainly an impressive year. Our restaurants are the busiest they've ever been, But our operators are focused on serving even more guests on every shift. Of course, we expect to continue to face inflationary pressures in 2024, albeit at a lower rate than we have experienced the last several years. Cattle supply will continue to be a challenge in 2024. Speaker 200:05:47However, we now expect the majority of the financial impact of this tightening supply to be in the back half of twenty twenty four. As such, we are updating our full year 2024 commodity inflation guidance to approximately 5% from between 5% 6%. On the labor side, our guidance for wage and other labor inflation remains unchanged at between 4% 5%. To help offset the impact of inflationary pressures, We will be implementing a 2.2% menu price increase at the beginning of our 2nd quarter. As we typically do, we partnered with our operators to determine the appropriate amount of pricing for each of our restaurants. Speaker 200:06:37This process includes looking at traffic trends, state mandated wage increases and local labor trends as well as comparing our prices to those of other restaurants in their specific community. This level of detail And operator involvement provides us with the confidence that we are taking the right level of pricing without sacrificing our value proposition. As Jerry mentioned, we opened 30 company owned restaurants in 2023, which included 22 Texas Roadhouses, 5 Bubba's 33s and 3 Jaggers. While sales volumes at New Texas Roadhouse Restaurants increased, So did the average investment cost in 2023. Part of this was the inflationary pressure on building costs that the industry faced in 2023, but it was also due to our strategic investment in building a larger prototype To be able to serve even more guests, the addition of dedicated to go areas and more back of house space needed to serve higher guest volumes has increased the size of the current prototype by approximately 10% from our pre COVID prototype. Speaker 200:07:58Returns on investment for our portfolio of new restaurants continue to exceed both our cost of capital and our targeted mid teen IRR. Before we fully shift our attention to 2024, It's important to recognize the financial accomplishments we had in 2023. We ended the year with $104,000,000 in cash and generated $565,000,000 of cash flow from operations. With this cash flow, We self funded $347,000,000 of capital expenditures as well as the $39,000,000 acquisition of 8 franchise restaurants. We also returned over $147,000,000 to our shareholders in the form of dividends, completed $50,000,000 of share repurchases and repaid the final $50,000,000 of bank debt that we borrowed at the onset of COVID. Speaker 200:08:58In 2024 and beyond, we will continue to make meaningful capital investments in existing restaurants as well as new restaurant development. At this time, our capital expenditure guidance for 2024 remains unchanged at between $340,000,000 $350,000,000 As always, investments will be evaluated to ensure we continue to put our capital to work where we create the greatest shareholder value. Overall, our shareholders were rewarded in fiscal year 2023 with EPS growth of 14.3% and a dividend yield of 2.1%. This total return of 16.4% is consistent with our average return over the past 10 years. With a disciplined approach to capital allocation and the excellent results we expect our operators to continue generating, We are confident that we can continue to reward our investors with strong returns for years to come. Speaker 200:10:05And now, Michael will walk us through the quarter results and provide additional 2024 guidance. Thanks, Chris. Speaker 100:10:13For the Q4 of 2023, we reported revenue growth of 15.3% driven by a 9.3% increase in average unit volume and 6.1% store week growth. We also reported a restaurant margin dollar increase of 21.4 percent to $177,000,000 and a diluted earnings per share increase of 21.3 percent to $1.08 Average weekly sales in the Q4 were over $141,000 with to go representing approximately $18,000 or 12.6% of these total weekly sales. At this time, to go has already become on average a $1,000,000 business per restaurant with additional room for growth. Comparable sales increased 9.9% in the Q4 driven by 5.1 percent traffic growth and a 4.8% increase in average check. By month, comparable sales grew 9.2% in both October November and 11.1% in December. Speaker 100:11:31And while weather has negatively impacted our year to date 2024 sales, Comparable sales are still up 6.8%, including 3% traffic growth for the 1st 50 days of the year with our restaurants averaging sales of approximately $155,000 per week during that time frame. In the Q4, restaurant margin dollars per store week increased to over $21,600 And restaurant margin as a percentage of total sales increased 75 basis points year over year to 15.3%. Food and beverage costs as a percentage of total sales were 34.2% for the 4th quarter. The 88 basis point year over year improvement was driven by the benefit of a 4.8% check increase offsetting the 3.2% commodity inflation for the quarter. Commodity inflation for full year 2023 was 5.6%, which was the midpoint of our guidance. Speaker 100:12:43Labor as a percentage of total sales decreased 28 basis points to 33.1 percent as compared to the Q4 of 2022. Labor dollars per store week increased 7.9% due to wage and other labor inflation of 5.5% and growth in hours of 2.4%. For the full year, wage and other labor inflation came in at 6.6%, which was the midpoint of our 2023 guidance. As Chris mentioned, we continue to expect wage and other labor inflation of between 4% 5% in 2024. Included within this guidance is approximately $3,000,000 of additional labor expense in the second half of twenty twenty four from enhancements to our equity compensation program, including a move from quarterly to annual grants. Speaker 100:13:44Other operating costs were 15.8 percent of sales, which was 49 basis points higher than the Q4 of 2022. Included in the year over year change is an approximately 40 basis point negative impact from adjustments to our quarterly reserve for general liability insurance. These adjustments include $3,700,000 of additional expense this year and a $900,000 credit last year. Moving below restaurant margin, G and A dollars grew 23.3% year over year and came in at 4.3 percent of revenue for the Q4. The primary driver of the year over year increase was higher cash and equity compensation. Speaker 100:14:33For 2024, the equity grant enhancement We'll also add approximately $3,500,000 of G and A expense in the second half of the year. Our effective tax rate for the quarter was 10.9%. Our full year 2023 income tax rate of 12.5% was below our guidance due to a lower than anticipated state tax rate and we are updating our expectation for the full year 2024 income tax rate to approximately 14%. Finally, as we reminded everyone last quarter, 2024 is a 53 week year for us. As such, the Q4 will have 14 weeks versus our normal 13 weeks. Speaker 100:15:21We estimate that the additional week could benefit full year 2024 earnings per share growth by approximately 4%. Now, I will turn the call back over to Jerry for final comments. Operator00:15:34Thanks, Michael. There's no question 2023 was another legendary year for Texas Roadhouse and we are looking forward to building on our momentum into 2024. As always, we will be focused on driving sales, controlling costs, taking care of our people and maximizing shareholder value. We are also looking forward to our upcoming Managing Partner Conference in Austin, Texas, where we will be celebrating all of our amazing partners. Additionally, we will be naming our annual Managing Partner of the Year for Texas Roadhouse and our 2nd ever Bubba's 33 Managing Partner of the Year. Operator00:16:17I'm very proud of our accomplishments and even more excited for our future. It's a great time to be a roadie at Texas Roadhouse. That concludes our prepared remarks. Operator, please open the line for questions. Your first question comes from the line of Jeffrey Bernstein from Barclays. Operator00:16:43Your line is open. Speaker 300:16:46Great. Thank you very much. Two questions. The first one, just thinking about the 2024 restaurant margins, It's pretty impressive you nailed the cost outlook in 2023 in terms of the ranges you provided for COGS and labor. If you were to do the same in 2024 and Obviously, you gave us the inflation guidance you expect at this point. Speaker 300:17:06But if you came in within those ranges, can you talk about the potential restaurant margin expansion outcomes or maybe the range of outcomes you or what you think would be the greatest unknowns in terms of that restaurant margin? And then I had one follow-up. Speaker 100:17:19Yes. Hi, Jeff. It's Michael. Thanks for the question. There are a couple of things that you may need to determine on your own and that really relates to the top line growth, how much traffic you want to assume, What pricing we may take in the Q4, but assuming modest traffic growth, modest additional pricing And kind of hitting the midpoint of our range, I do think you have opportunity to see restaurant margin expansion and really the other operating is probably the biggest area for that expansion. Speaker 100:17:56You may also get some labor, you probably would get some expansion earlier in the year And then some of those enhancements that we've talked about may flatten that out. And then your commodities We're probably with the stair step up in the commodity inflation, you're going to see leverage earlier in the year. And again, that's just with the guidance that we've given how it probably would play out. Speaker 300:18:25Understood. So it sounds like both labor and Commodities could be more favorable in the first half less so in the back half? Speaker 100:18:35Yes. I would agree with that as far as how we contemplate the inflation playing out. Speaker 300:18:41Got you. And then just to clarify on the comp strength through the Q4, Pretty stable in October, November, accelerated nicely in December. Is there any change in consumer behavior you're seeing, whether traffic or mix shift, how the consumer spending Even going into the 1st 50 days of this year, I'm just wondering whether you get the sense there's any change in behavior, with obviously a lot of people anticipating a potential slowdown or Whatnot, but I'm just wondering what you're seeing across your portfolio of brands in terms of consumer spending patterns and behavior? Thank you. Speaker 100:19:14Hey, Jeff, it's Michael. Again, I'd say we are very excited about what we're seeing at all of our brands. The Consumer behavior does not seem to have changed in the Q4 or really changed much in the 1st 50 days of the year. And a lot of that can be seen by the traffic growth that we put up. I mean, we continue to see some negative mix in the Alcohol category, I think that's more of an industry behavior than anything directly related to Texas Roadhouse. Speaker 100:19:49But other than that, I think we continue to see guests trading into us from Fast casual or other casual diners, some of those are probably going more towards the value side of our menu, the 6 ounce sirloin and the other lower priced items and maybe they're not they're getting a soft beverage instead of an alcoholic beverage, but we feel very happy with the consumer right now. Speaker 300:20:18Fantastic. Thank you very much. Operator00:20:22Your next question comes from the line of Peter Saleh from BTIG. Speaker 400:20:28Great. Thanks for taking the question. I didn't want to come back to the conversation around the commodities. You've reduced your outlook or at least the inflation outlook just slightly. I assume you guys are Mostly contracted on the first half of the year, so you got some good visibility. Speaker 400:20:45Can you just elaborate a little bit on really what you're seeing there and what really caused you to kind of take that down, albeit modestly? Speaker 100:20:53Yes. Hey, Peter, it's Michael. It really had to do with, you're right, the first half of the year, What we were seeing in the Q1 and some of the expectation of what will continue the next several months. And we do then think that tightening really starts to have a bigger financial impact on the industry in the back half of the year. So the change was largely because of the beef outlook in the earlier months. Speaker 100:21:25You are correct. We have a certainly in the Q1 a good amount of our beef and our commodities locked. It becomes a smaller percent as we move further out for competitive reasons, probably not going to get into much more detail as to what percent locked. But again, our beef experts are picking and choosing their moments as to when to lock in and when it's better to be on a formula basis. Speaker 200:21:50And Peter, this is Chris. I'll just add to, I talked last quarter about the other part of our basket is helping to offset the beef inflation. That's continuing. So we're certainly seeing that. But everything Michael just told you about our situation with beef is continuing. Speaker 400:22:09Great. Thank you. And then just on the CapEx, I know $340,000,000 to $350,000,000 I recognize that is obviously much higher than was several years ago. Can you just help us out in terms of what's really changed over the past couple of years? I know you said your The restaurants are a little bit larger, so that's adding some more to the expense. Speaker 400:22:32Are you also doing any bump outs this Any other renovations that we should be aware of that are kind of driving that number that high? Speaker 100:22:42Yes. Hi, Peter, it's Michael. I mean, we certainly will be doing bump outs like we have done in past years and other Remodels, those higher numbers really are reflection of the inflation that Equipment and labor has seemed to get work done over the last several years. Coupled with we're now an older base of restaurants than we were before and we're busier than we've ever been. So we have equipment That needs to be replaced and getting work done, whether that be building a new restaurant or bumping out an existing restaurant cost more than it did in the past. Speaker 100:23:26So that's really what has driven those costs higher. Yes. Speaker 200:23:32And the only thing I would add to that again is Chris. The only thing I would add to that is our investment in some technology like Jerry was talking about the 200 restaurants we're going to put Digital Kitchen in. So that will add as well. But those are all investments we feel really good about paying off in the future. Speaker 400:23:50Thank you very much. Operator00:23:53Your next question comes from the line of David Tarantino from Baird. Your line is open. Speaker 500:24:00Hi, good afternoon. I had a couple of questions about the pricing philosophy and the margin outlook. So I guess first, with the price increase you're planning in March, it does look like the total pricing that you're taking this year is going to be pretty closely matched up with inflation. And I think in the past, The philosophy has been to perhaps under price versus inflation. So do I have that right? Speaker 500:24:30And then if so, is this a change in your philosophy on how you're managing margins going forward? Operator00:24:39Well, I think we have always taken a conservative approach in how we look at it throughout the country and maintaining value in our menu. So when we gather with our operators and really talk over about mandated wage increases and different things that will affect their business. We still want to have a competitive mindset as we go into keeping our value built into our menu and making sure that we're also keeping value for our consumer in place. Michael can talk to a little bit on the numbers from that. Speaker 100:25:12Yes. I think, David, what I would mention is, it definitely is not a change in our philosophy. We've always said, we want to be pricing for the structural component of inflation, which is largely wage inflation, but that doesn't mean that we're always pricing for all of it as soon as we're feeling it. So Some of the pricing that we are taking now is to offset wage pressures that we have felt over the last several years as we continue to manage That labor line both through productivity efforts, but the reality of the higher wage rates that we're paying. So Definitely not a change of philosophy, still going from a bottom up approach of talking to each operator and making sure they are absolutely in alignment with what we're doing. Speaker 500:26:01Great. That's a helpful explanation. And then on the commodity outlook stepping up in the second half, does that sort of give us Some visibility into next year and that maybe the beef costs or whatever commodity costs are accelerating, I assume it's beef, Could you could have a carryover impact from that as you look into next year? I just want to understand how to think about that. Speaker 100:26:30Hey, David, it's Michael. I would say it's a little early for us to give you any thoughts on what this could mean for 2025. But The industry reports out there, obviously, are calling for tighter supply into 2024 and as of yet not hearing Much relief coming in the future, but a little early for us to be able to give you any true thoughts about 2025. Speaker 600:26:58Great. Thank you. Operator00:27:02Your next question comes from the line of Dennis Geiger from UBS. Your line is open. Speaker 400:27:08Great. Appreciate it. Wondering if you could talk Speaker 700:27:10a little bit more to sort of thinking about the labor situation as it relates to labor relative to traffic for 2024, does that look more like the historical relationship? Might you look better Then the historical relationship, maybe if you could just kind of touch on what that looks like and perhaps how digital kitchens and tech more broadly maybe able to help out from that perspective? Speaker 200:27:35Hey, Dennis, it's Chris. Yes, I'll start. I mean, I think we were really encouraged in the 4th quarter, our labor hours grew less than 50% of traffic growth and that was it's been difficult to achieve since the pandemic. And so, there's a focus by our operators on that line item. And the fact that we have Employees staying with us, our turnover is at or better than it was pre COVID. Speaker 200:28:04And all of those things provide some encouragement on that particular line item. But again, to have achieved it in the Q4, We're projecting that we can do it again in the Q1. And so I think all that's very positive. And I'll speak to Operator00:28:19the Digital Kitchen. This is Jerry. We've opened all of our new stores open with the digital kitchen this year. We converted 20. We've really been talking Strategically about how to get the whole Roadhouse concept on that digital kitchen format because of the many benefits that we see not only for the commotion in the kitchen itself, but even the ability to track our cook times and so many features that we believe will enhance Our experience for our employees in the back of the house and it will impact in a positive manner the cook times for our front of the house table turns. Operator00:28:56So The digital kitchen is a huge commitment. The feedback from our operators has been incredible and the demand and desire is there. So The number is a pretty big number for us, but we've got a great game plan. And I think strategically, we're going to execute at a high level To do that, all of Jagger's and Bubba's already on the digital kitchen format. Great. Operator00:29:18Thanks guys and congrats again on the results. Thank you so much. Your next question comes from the line of Sara Senatore from Bank of America. Your line is open. Speaker 800:29:30Hey, thank you. Just two clarifications. The first is on the labor point, you made the point that you grow hours less than traffic. I guess I was under the impression that maybe as we think about fiscal 2023, you were kind of getting to full staffing over the course of the year across most of the restaurants. So while your wage inflation maybe was highest in the first half, Yes, maybe your hours were not. Speaker 800:29:57And so I was just curious if that if there is sort of an opportunity in the second half of this year to maybe have more labor leverage from that perspective even if wage inflation is perhaps more moderate And whether the technology may also contribute to that. So that was the first clarification, just sort of the staffing approach through 2023. Speaker 100:30:20Yes. Hey, Sarah, it's Michael. Yes, I do think what Chris talked about that those labor hours growing at less traffic is something that could certainly continue into Q2 and into Q3 and into the Q4 as well. Our operators are focused on that productivity. People are staying around longer. Speaker 100:30:47So that is certainly an expectation or something that we are going to be working all year long, getting that better productivity on the labor hours. Speaker 800:31:00Great. Okay. Thank you. And then the question was about, your mix has been very consistent, just modestly negative, even though we seem to be keep hearing that The industry is getting more focused on value. So are you seeing anything that would suggest that your relative value proposition is That gap is narrowing or people are making different decisions just because it doesn't appear to be showing up in your comps at all, but curious on your thoughts on that. Operator00:31:28Yes, I think just like to your point, it's not showing up glaringly for us either. I think our value has always been built into the menu and The consumer feels very good about our offerings and from that standpoint, whether it be our steak or our chicken or all of our offerings are country dinners. We feel very good about where we're placed, but we don't see anything to indicate that there's a lot of movement within that menu pricing. Speaker 800:31:54Thank you. Operator00:31:56Thank you. Your next question comes from the line of David Palmer from Evercore ISI. Your line is open. Speaker 900:32:04Thank you. And amazing quarter to date comps, really amazing comps. Operator00:32:10Thank you so much. Speaker 900:32:12I wanted to ask you about KDS. You just commented a little bit about some of the things that it does for you. And The good news, I guess, is that you're not you don't have to be pioneers on KDS. You've seen it in some of your brands already. Can you maybe give us a sense of what it can do to the metrics that the Wall Street Nerds would be following, Comps, margins, things like that, maybe even this is something that will help you on that labor leverage where you might be able to add less hours because of table turns and you make the shift work better, I don't know. Speaker 900:32:48But is there any metrics that you could share what it does for you? Operator00:32:53Well, David, thanks for I think that this is Jerry. The benefit for us is really about the efficiency of the overall kitchen. And the way that the digital kitchen organizes through the screens versus through the tickets creates a lot less chaos, I guess, you could say. There's no doubt we can track our cook times. There's some real positives from that side of it as we've already seen. Operator00:33:17And again, we're only 40 or 50 in, but we are very Committed. Every indicator that we have and Michael will talk to your Wall Street nerd thing. But I will just talk to you as a kitchen guy. What I see in those kitchens is communication, consistency. It just organize it so people don't stress out when You got a whole bunch of tickets in front of you and all of that and we can clearly monitor how long our cook times are. Operator00:33:44So that will be a big win for us going forward. And then think Michael has a couple of comments. Speaker 100:33:48Yes. Thanks, Jerry. Yes, I do think again that calmer kitchen does lead to a happier Rody, who has been less likely to seek other employment, so maybe your turnover improves because of that and you're keeping that efficient productive employee for longer. But as far as what it may do to the front of the house, I think we have found that the digital kitchen does time the food out a little bit better. So maybe Those salads get out as an appetizer to the guests a little bit quicker and the entrees are getting out there a little bit quicker. Speaker 100:34:28So You couple that benefit with our Roadhouse pay, our pay at the table system, which is speeding up The check and change portion of the dining experience and then maybe At the guest's discretion, you have shortened the table turn time and which allows you to quote a shorter wait time to that next guest. So By the end of the night, maybe somebody who was previously being told they could be sat at 8:30 is now being told 8:10 or 8:15 and that may make all the difference and their willingness to stay and us getting another table turn out of in the restaurant. Speaker 900:35:10And is this something that you'll ramp the deployment of? I know you wait for it to be pulled, but I Would imagine at this point that it's being pulled heavily. I mean, how fast can you roll these out? Can this be done by the end of 2025, for example? Any sense of that? Operator00:35:28Well, I think we're going to try to get through this year and see how these 200 go. And then obviously the intention is to get the whole concept done. I think it might Take a little longer than that, but we want to do it strategically and we want to execute at a high level for our partners. So, we'll be as fast we possibly can because we're committed to it and believe in it, but I don't want to put a date on it yet. Speaker 900:35:51Thank you very much. Operator00:35:53Thank you. Your next question comes from the line of Jeff Farmer from Gordon Haskett. Your line is open. Speaker 700:36:00Thank you. Just some quick modeling follow ups. Assuming the 2.2% menu pricing takes place in March, What would Q1 and Q2 menu pricing be? Speaker 100:36:12Sure. Hey, Jeff, it's Michael. And again, That pricing will go into effect our 1st day of our Q2. So for The Q1, you won't get any benefit from it, but we'll have between 4.8% and 4.9% pricing in Q1, And we'll have basically the same thing in Q2 and Q3, about 4.8% to 4.9% for both those quarters. And obviously, if we didn't do anything in the back half of the year in the Q4, we would only have the 2.2% in Q4, but we'll reevaluate what's appropriate as we get later into the year of what we may want to add on to that. Speaker 700:36:54Thank you. And then now weather impact on the quarter to date same store sales in the Q1, did you share that? Speaker 200:37:01Yes, that's this is Chris, Jeff. January, we had and we talked about that in the prepared remarks, but January had 2 Really tough weeks, and it impacted the guest counts by about 2.5%. And so if you take that extrapolated into the 1st 50 days, we were down about 1%. So the 3% growth that Michael shared with you, if you take that weather out, would have been 4%. So there was a lot to be proud of in 1st 50 days and our operators, they slog through those 2 very difficult weeks and took care of the customers that were able to show up and serve them well, but it was a great first 50 days in spite of those 2 weeks. Speaker 700:37:53It was definitely. And just last one for me. Q4 check, I think you shared was 4.8%, but just some quick breakdown of pricing and mix for the Q4? Speaker 100:38:05Hey, Jeff, we had 5.5% pricing in Q4. So therefore, we had about 70 basis points of negative mix giving us that check up 4.8. Speaker 1000:38:15All right. Thank you. Pass it on. Operator00:38:19Your next question comes from the line of Lauren Silverman from Deutsche Bank. Your line is open. Speaker 1100:38:25Hi, thanks and congrats on the results. I wanted to ask first just on the other OpEx. It's been growing pretty steadily even if you exclude some of the one time items that you talked about. Can you just Help us understand how to think about OpEx growth or on the other OpEx side in 2024? Speaker 100:38:49Hey, Lauren, it's Michael. Thanks for the question. You are right that those even though we did get some been getting some leverage Overall on that line, it is the underlying pressure has remained and there are a lot of inflationary items in there, a lot of services in there. But your repair and maintenance cost is a big one on top of the general liability, Insurance costs, even absent some of the reserve adjustments we've had. So moving into 2024, I do think that on a dollars per store week, you will continue to see an increase, but it should not be At the rate that we have seen, probably you probably start a little bit higher in Q1, but mid single digit Growth in those dollars per store week and then maybe coming on a little bit from that as you move through the year. Speaker 100:39:46That's obviously without knowing what other kinds of reserve adjustments we may have or not have, but with what we know right now, that would be my expectation. Speaker 1100:39:58Great. Very helpful. On the to go side, you saw sales per week accelerate, it looks like throughout the year in terms of growth. Can you just provide a little bit more color on what you're seeing on that to go side? And why you've seen, I guess, positive growth at least over the last three quarters now? Operator00:40:17Yes, I'll start off. I just really believe that it's our ability to execute full dining rooms and continue to keep the level of service through our to go experience. So I think as our operators have gotten used to that volume at the high level that we are at, it has allowed us to continue to take more orders and be more available to our guests. Speaker 200:40:37Yes, this is Chris. I'll just add on. I mean, and I know you watch us every quarter, but you saw that It sort of spiked during the pandemic, then it began to come down over time and now it is kind of coming back up again. So This is just to Jerry's point. Our folks know how to execute it and it's definitely a popular thing for our guests. Speaker 200:40:59So we're looking forward to continuing to see that do well over time. Speaker 1100:41:06Great. And just last one for me. Can you just clarify, and I appreciate the color and all the quarter to date, what you're running in terms of comp as the weather Just to clarify. Speaker 100:41:20Sure, Lonnie. It's Michael. So within that 50 days, I guess I can tell you our January comp was a 4.2% and then the last 3 weeks plus a day was a little over 10%. Speaker 1100:41:42Appreciate all the color. Operator00:41:46Your next question comes from the line of Andy Barish from Jefferies. Your line is open. Speaker 1200:41:53Hey, guys. Most of my stuff has been asked. Just, could you quantify in the 4Q sort of the holiday benefit of the And then the Lenten season is upon us and started a week earlier for 1Q. Any commentary around that for the rest of the quarter? Or is it kind of minor? Operator00:42:18Hey, Andy. How are you doing, bud? Listen, I can the Q1, obviously, we just had Valentine's Day yesterday, which gives us a great indication that we're often running strong and solid. So that's hard to all the other things that you asked about I do know we have some promotional stuff going on at JAGGERS, but I think right now without the weather, the momentum is very solid into the Q1. Speaker 100:42:43And Andy, it's Michael. I don't know if I have any numbers at my fingertips regarding the benefits around the holidays. We definitely Saw some benefit in that timeframe, but I'm not going to be able to put a number on that right now. But Again, the numbers we've been putting up go beyond just a couple of days With the calendar shift, we've saw strain for quite a while. Speaker 1200:43:12Understood. And Operator00:43:13then just circling back on the Speaker 1200:43:15CapEx With the 200 digital kitchen conversions coming in, but total CapEx staying the same, what's the offset there where there's some idiosyncratic things that kind of hit last year or how should we think about that, staying flat, although Clearly spending some more capital on this on the KBS. Speaker 100:43:41Yes. Andy, without getting too much into the details, it's fair to say that our initial estimate that we put out there gave us some room, some wiggle room for other projects and things to come in there And the acceleration of the digital kitchens filled some of that space. So, again, We left ourselves some room for that. So it was not that we did this and had to replace it with take something else out. Speaker 200:44:14Yes. And I'll just Andy, it's Chris. I'll just add into that. I mean, it's about $45,000 a store to put the KDS in. And so You're talking about roughly $9,000,000 and on that big of a budget, we can find a way to get it in there. Speaker 1200:44:31Great. Appreciate the detail. Thank you. Operator00:44:35Thank you. Your next question comes from the line of Chris O'Cull from Stifel. Your line is open. Speaker 600:44:42Hey, thanks. Good afternoon, guys. Jerry, are you seeing any signs that are growing that a number of your restaurants may be getting closer to capacity during peak hours? I'm just wondering if you're seeing a need for additional bump outs or maybe any other approach that could increase sales headroom? Operator00:45:00Yes. Chris, thanks for the I think the bump outs and we're doing cooler expansions, which really that's part of what the costs are is giving these folks that are really serving A lot of guests is really more storage in the back to be able to get more food in their building. The upside to even at our elevated average unit volume at over We've got a large group of restaurants that are doing significantly more than that. And so as I've said in the past, they're the ones leading the way that show us that even our average unit volumes can increase year after year if we continue to execute and do the things that our operators need to be able to get more people through their building and there's definitely a demand there. We just got to continue to execute, more people, more product and we'll be just fine. Speaker 100:45:51And Chris, this is Michael. I just want to add on to what Jerry said, which I think is quite impressive. Those highest volume restaurants, The ones that are above average or well above average continue to comp at or at least at the average, if not better than average, And that certainly happened throughout 2023. So we haven't seen those busiest restaurants Come up against a wall as far as growth. So that gives us quite a bit of confidence for even our the room that our average stores have for future growth. Speaker 600:46:25That's impressive. And then could you provide some additional color around what unit economics you're targeting at Jaggers? And then maybe how many development commitments that you have right now for JAGGERS? Operator00:46:40Yes, go ahead, Michael. Speaker 100:46:41Yes. Chris, it's Michael again. I would say it's a little early for us to get into specifics on returns. Clearly, we have a couple of franchisees already who have opened stores and will be opening more stores. So I don't want to put words in their mouth, but I would say they are pleased with what they are seeing and there are continued conversations with future partners as well. Speaker 100:47:07So not going to get into returns either on the company side or the franchise side, but We are very pleased with what we are seeing and what we believe Jaguars can do going Operator00:47:19forward. Great. Speaker 600:47:22Thanks guys. Speaker 1300:47:23Thank you. Thanks Chris. Operator00:47:26Your next question comes from the line of Andrew Strelzik from BMO. Speaker 1400:47:33Good afternoon. Thanks for taking the questions. I was hoping you could start maybe by giving some color on Bubba's. I know you've done a lot of work on the brand over the last 2 years or so. So where are you seeing progress or other areas that need more work opportunities, Thoughts around where Bubba's is today would be great. Operator00:47:52Yes. Thank you, Andrew. I feel really good about Bubba's. We've put a lot investment in the last couple of years, not only on the people, getting the right people, the leaders, the support all the way around it. We've done some, what I think are really solid structural parts of the building to keep the cost down, and we see our sales growing. Operator00:48:12So all of the indicators are that people are loving the food with the burgers and the pizzas and the energy that we have with our rock and roll. But I think the biggest thing is about having leadership, having consistency and the ability to execute and people identifying who Bubba's 33 is. So all indicators are very positive and we're very happy with the continued progress that Bubba's is making. Speaker 1400:48:37That's great to hear. And then just following up on some of the commodity inflation or food inflation outlook. You noted the kind of more modest increases in the first half of the year and then a step up in the back half. Can you be a little more specific kind of either front half, back half or by quarter kind of how you're expecting that to progress? Yes. Speaker 100:48:57I mean, hey, Andrew, it's Michael. I'd say Q1 is definitely Our expectation to be at the low point where maybe you're in the 2% to 3% inflation range and then it grows From there, and I don't know necessarily have any that the Q2, 3 and 4, That's dramatically different than each other. It is a stair step up certainly from probably Q2 into the back half, But that Q1 is really the one that stands out as being a little bit lower. Speaker 1400:49:34Okay. And maybe if I could just Squeeze one more in. A question on buybacks and your appetite there. You noted paying off the last bit of the debt there, I know the CapEx is going to be up, but I'm just curious your appetite for share repurchases at this point for 2024? Thanks. Speaker 200:49:51Yes, Andrew, it's Chris. Look, our operating cash flow and our balance sheet are major advantages for us. And so we are going to continue to take this balanced approach over the long haul like we have. And you saw the increase to the dividend that our board approved with Jerry and that we're happy to have that out there. And we'll look at share repurchases. Speaker 200:50:15Obviously, the first place we go is to think about bringing in the dilution. But As we have opportunities to continue to invest, we'll look at that first. But then if there is Cash left over, we're going to be looking at continuing the share repurchase program. Speaker 1200:50:34Great. Speaker 1400:50:34Thank you very much. Operator00:50:38Your next question comes from the line of Gregory Francfort from Guggenheim Securities. Your line is open. Speaker 1500:50:45Hey, thanks for the question. I had 2 quick ones. Speaker 1300:50:49The first is just I know Speaker 1500:50:50you answered the question on capacity earlier. I'm curious your appetite to maybe accelerate unit growth beyond that kind of 5% to 6% range. I mean, you guys are running really healthy traffic and I'm Wondering if you what would it take to maybe expand that pace of unit growth a little bit? Operator00:51:08Well, thank you. It's important for us to keep a cadence of how many openings that we can do a year and be balanced in our approach. And we have to do it right. We have to get every store opened With incredible energy, it takes a lot of folks inside. So we like our number of what we're doing for Roadhouse and the other two brands. Operator00:51:27So You'll probably see us stay very close to that. If we get an opportunity to increase a couple of here and there, we might take that opportunity. But I don't think we're going to change our overall strategic goal or game plan on growth. Speaker 1500:51:41Got it. And then just maybe, I may have missed it earlier, but Any thoughts on where the turnover environment looks like or the quit rates or what that might be doing to your training and ability to train Any thoughts on the labor market would be helpful. Operator00:51:58Yes. Thank you. We feel really good. We put a lot of work into it in the last couple of years. And We look at it 3 levels, our managing partners, our managers and our roadies. Operator00:52:09And all three of those indicators are that turnover is coming down, which also means that we're getting more reps and running these shifts that are at a higher volume. So all of those indicators are pretty solid. There are folks Applicant flow has been pretty solid for us. So from that standpoint, the work and the effort that we put in has really benefited. I think we're creating an environment where our employees want to work and be a part of something that's really special. Operator00:52:35So, I believe it's a very positive environment out there and we are benefit. The longer our folks can stay around and we keep Roadie Nation happy, they're going to keep taking care of us. Winners win. Yes. Thank you, guys. Operator00:52:52Your next question comes from the line of Brian Vaccaro Speaker 1500:53:00Just circling back on the topic of table turns and ROADY pay, etcetera. And I guess tying it into comps a little bit, obviously, your comps have been impressive for a long time now. But I'm curious as you dig into your Tom, it's a little bit. Are you seeing outsized growth or even maybe a little bit of an acceleration in peak demand periods that you might be able to tie back to table turns or more broadly, are there any other daypart or regional differences in your recent trends that might be worth highlighting? Speaker 100:53:31Yes. Hey, Brian, it's Michael. Good to hear from you. Some of that is a little difficult to parse out, But I can tell you, geographically, we are seeing similar results across the country. By age of our restaurants, we're seeing similar results. Speaker 100:53:54And then as far as the day part, We are seeing a little bit more strength earlier in the day and into the power what we call the power hours at 6 to 8 o'clock timeframe. So whether that's coming from the technology investments, hard to tell you, but we're certainly Doing everything we can to give that guest a good experience, give them the opportunity to get in and get out at their pace. And I think that's what we'll continue to focus on going forward. Speaker 1200:54:33All right. That's helpful. Thank you. Operator00:54:36Your next question comes from the line of Brian Harper from Morgan Stanley. Your line open. Speaker 500:54:44Yes, thanks. Maybe just one for me, Michael or Chris. What do you have any view on kind of G and A this year either in growth terms or percent of sales as you think about leverage there? Speaker 100:55:00Hey, Brian, it's Michael. Yes, G and A as a growth company, we're going to continue to invest in our people, in our systems. I think our philosophy remains the same that we would like to see those G and A dollars grow less than revenue growth and continue to see if we can to see if we can get some leverage there, but we were at 4.3% of revenue in 2023. That's come down significantly from where we are. So we'll see what happens in 2024. Speaker 100:55:31I can tell you that You probably would see in Q1, I think we have the most opportunity to not see a lot of increase, but then after that, you will start to see some increase. Again, being a 53 week year, You could see us having the need to accrue for additional bonus compensation and then again you would then lap that into 2025. And we talked a little bit about some of the equity compensation enhancements that we've made and that will impact second half of the year. So I think you'll continue to see those G and A dollars grow and maybe it's not a year where we get a lot of leverage. Some of that will Depend upon what the top line ends up doing, but yes, definitely investments to be made in the business. Speaker 1200:56:30Thank you. Operator00:56:33Your next question comes from the line of Jim Sanderson from Northcoast Research. Your line is open. Speaker 1600:56:39Hey, thanks for the question and congratulations on a great quarter. I wanted to go back to the mix issue. It seems to me that's improving not as negative as it has been. Do you expect that to pretty much iron itself out, so to speak? And is there an opportunity to actually see that become an upsell opportunity to make that positive as we go into the back half of the year. Speaker 100:57:01Hey, Jim, it's Michael. I mean, you are correct, Q4 with the 70 basis points was A little bit less than what we haven't seen in the last couple of quarters. There were a few things in there that benefited us in the Q4 around the holiday time. You see maybe an increase in bread sales and the such that can offset some of some other areas. It will be something we'll be watching here into 2024 whether that trend continues. Speaker 100:57:34Entrees, again, if we continue to see people trading into us and growing our traffic, but maybe they're hitting the value side, You could have a little bit of negative mix there. And that alcohol is a little bit of a question mark. I'll be honest with Will that flatten out or just kind of the societal trends right now of I think a little bit less alcohol sales You may stay with us. That's just one we'll have to wait and see what happens on. Speaker 1600:58:06Okay. So probably a little bit of Headwind going forward, just not Speaker 100:58:10as bad. Is that the right way to look at it? It's a hard one to fully answer, but I think in The economic consumer environment we're in, it would not surprise me for it to be a little bit of a headwind. But again, It's one that until you really see what's going on, it's hard to fully predict. Operator00:58:32All Speaker 1600:58:32right, understood. Thank you. Operator00:58:35Your next question comes from the line of Rahul Kratupalli from JPMorgan. Your line is open. Speaker 1000:58:42Thanks for taking my question guys. I just wanted to follow-up and expand a bit more on Bubba's. Can you discuss the store margin growth year on year and help us get some confidence in the longer term store margin profiles for this concept. Is there a potential for this to be At or above Roadhouse, can we expect an inflection at some point? Or are there any structural costs like prime cost for this concept lower versus Roadhouse as we go forward? Speaker 1000:59:10And I have a follow-up. Speaker 100:59:13Hi, this is Michael. I can answer some of that, but I'm can give you all the information that you're maybe looking for. I can tell you, we feel very good that Bubba's can generate those Mid teen returns that we're looking for, we believe Bubba's can generate a very strong restaurant margin. Your point of can they be in line with Roadhouse, if they were doing similar sales volumes, yes, absolutely that is But the reality is Roadhouse performs at a higher level than Bubba is in a higher level than most restaurant concepts. So that is going to benefit Roadhouse from a margin perspective. Speaker 100:59:58But the menu items that we have at Bubba's would lend itself to a very strong margin as compared to Roadhouse on similar volumes. I think that's about as far as we're probably going to go on that one right now. Speaker 1001:00:14That's helpful, Mike. Thanks for that. And on the follow-up, I know you guys talked about having a total 900 stores TAM for the company as a whole. And I think like Roadhouse was targeted at 700 to 8 100 over time. I know you guys discussed a lot of new like the digital kitchens, like new store formats and whatnot. Speaker 1001:00:33I'm just Curious if there is an updated thought on this number and how you are looking at this going down the line? Yes. Operator01:00:41Thank you. We believe that's a great target for us. We adjusted that I believe just a little over a year ago Through a lot of research and just thinking about our business going forward, so there's no adjustment to that number now. We're still focused on being responsible to all of our partners out there, but we believe we can get to that number. Speaker 1001:01:02Perfect. Thanks, guys. Operator01:01:04Thank you. Your next question comes from the line of Jon Tower from Citigroup. Your line is open. Speaker 1701:01:11Great. Thanks for taking and hanging in there. Just real quick, first on the G and A side, the grant changes that you're talking about in the second half of twenty twenty four, I'm assuming those are not one time in nature and something that will carry So just wanted to first confirm that? Speaker 101:01:29It's Michael. On the G and A side, those are a little bit more One time in nature, it's really an acceleration of the grants. So we'll still be expensing grants that we've been given quarterly over the last several years and we will now be pulling up and granting all at one time, some grants that would have been happening over the next several quarters. So you'll we'll feel that One time in Q3, Q4 and then some into the beginning of next year, the majority of it will then not have an impact on us after that. Speaker 1701:02:12How about the labor line that you had mentioned earlier as well? Speaker 101:02:16The labor line is more of is not as much one time in nature. While you do have that acceleration going on the other enhancements of us increasing the amount of grants to some Store level employees is part of it, but also including additional manager levels in the granting of Equity compensation. So that is one that will stay with us going forward. Speaker 1701:02:46Great. Thanks. And then just curious, Your business has obviously got very strong demand from a traffic standpoint. And I know you've had some success earlier in terms of expanding some of the early dine options during the weekdays, I think you since COVID added about an extra hour or so to that during the weekdays, if I'm not mistaken. So curious, do you feel like there's more opportunity perhaps extend that further? Speaker 1701:03:13I think it's mostly 3 p. M. To 6 now. Could you push it further to 2:30 or 2 o'clock or is that just something that kind of not contemplated today to meet that demand? Operator01:03:27Yes. Thanks, John. I think it really is open to a 5:30 or 6 So if they open at 2:30, 2:45, but most of the stores are opening at 3 o'clock. So as soon as they open that early dine kicks in. I think that's where we'll stay For now, I don't see us getting any earlier than that, but might be a few out there. Operator01:03:47Great. Thanks for the time. Thank you. Your next question comes from the line of Jake Bartlett from Truist Securities. Your line is open. Speaker 101:03:58Great. Thanks for taking the question. Speaker 1301:04:00Mine is about development. First, maybe a clarification. You said today that you expect to open or you continue to expect open 30 company owned stores across the 3 brands. My reading of the last earnings call was that it was 30 with Texas Roadhouse and Bubba's, but then 3 Jaggers. But just to confirm, is there any change in the company owned development outlook in 2024? Operator01:04:25Jake, I don't think there's any change at this time. We're definitely after the massive amount of openings we had in the last 4 months of 2024, we are trying to strategically spread that out a little bit. But as of right now, we are focused on that number between the 3. Speaker 101:04:41Yes. And I would just Jake, this is Michael. It does say approximately 30%. So we just put all of those into there. The Jagger's timing, whether we get 3 open, we will see and those could be later in the year, but we just felt It was cleaner to give you all that number all in one. Speaker 1301:05:05Got it. And you also mentioned that the cadence to be more balanced over the year. Maybe if Speaker 101:05:11you could dig into that Speaker 1301:05:12a little bit, maybe comments on the development environment, the headwinds we've been You're in the balancing for 3 or 4 years now. Is that are you starting to see signs that that's easing and that's what gives you more confidence in a kind of evenly spaced development in 2024? Speaker 201:05:31Yes, Jake, it's Chris. And I think we are seeing that smoothing out a little bit. And Jerry oversees our development team himself. And so that's something he may want to speak to. But I will say that A lot of the jurisdictional issues, the permitting issues, things that you've been hearing from us and others are largely behind us. Speaker 201:05:53There are still occasional problems in the supply chain, but for the most part, we're getting work done, although at a higher cost. And so that's definitely seems to be with us as we go. But we do feel good about the way that we've got this we're calling this cadence that we've built And we feel very good about that as it's flowing through. I don't know if you had anything you wanted to add, Jerry? Yes. Operator01:06:16Thanks, Chris. Just as a matter of the lot of work been put into this timeline and building in that what the times that it takes to get all of these set up and then we can make the decision. So I think there's been a lot of work and effort. It's looking really good right now for 2024 and 2025 and we really want to keep that cadence going forward. It takes a lot of pressure off of our crew to get the most of the openings in the first three quarters versus jamming everything into the Q4. Operator01:06:42So we've been working really hard on that and we're going to keep trying to keep that cadence going forward. Speaker 1301:06:48Great. And then last little kind of nitpicky modeling question. If I look back at the extra operating week in 2019, Q4 of It was about a 60 basis points benefit to restaurant margins. Is that where we're getting the 4% impact for the year when math could tell you 2% for an extra week. But is that about right, the 60 basis points boost in the restaurant margins and that's really where the outsized earnings from that week comes from? Speaker 101:07:15I mean, Jake, it's Michael. I don't have the numbers right in front of me for this call, but certainly you are getting margin expansion that as part of the reason why you're getting 4%, an estimated 4% benefit for approximately 2% increase in store week. So probably as much as I can give you on that. Some of the benefit does come outside of restaurant margin as well, but there is a benefit There surely is a benefit in there from that high volume extra week. Speaker 1301:07:54Great. I appreciate it. Thank you. Operator01:07:59This concludes our question and answer session for today. I would like to turn the call back to Jerry Morgan. Thank you and all for being on our call tonight. And to Rode Nation, yeehaw to an incredible year. Thank each and every one of you. Operator01:08:15Let's go. This concludes today's conference call. Thank you for attending. You may now disconnect.Read morePowered by