Texas Roadhouse, Inc. Price & Performance (TXRH)

Thank you, Sarah, and good evening. By now, you should have access to our earnings release for the fourth quarter and the 12/31/2024. 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. We refer all of you to our earnings release and 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 Following the prepared remarks, we will be available to answer your questions. In order to accommodate everyone, I would like to ask a question Could everyone please limit yourself to one question? Now, I'd like to turn the call over to Jerry, Thanks, Michael, and good evening, everyone. 2024 was a memorable year for Texas Roadhouse, with strong performance in all aspects of our business.

Thanks to positive traffic growth at all three brands, revenue grew to nearly $5,400,000,000 and average unit volume exceeded $8,000,000 for the first time in our history. This was the second consecutive year of double digit increases in restaurant margin dollars income from operations and earnings per share. 2024 was also special for a number of miles system wide restaurant and our first international JAGGER's. Additionally, we were named the brand icon by as a public company.

There is also no doubt that our people first mentality was alive and well in 2024 as we continued giving back to the communities we serve, This included partnering with Homes for Our Troops to fully fund their 400 custom built home, raising over $925,000 for the American Tinnitus Association in honor of our late founder, [indiscernible] And on Veterans Day, we honored over 1,000,000 veterans with a free meal or a voucher for a future meal. On the development front, we opened 31 company owned restaurants across all brands in 2024 Our franchise partners also opened 11 international Texas Roadhouse restaurants in addition to three JAGGER's, For 2025, we continue to expect approximately 30 company restaurant openings [indiscernible] the three brands. 2025 will also benefit from the January 1 acquisition of 13 franchise restaurants in Indiana, Ohio and California. Our outlook for franchise development also remains unchanged with an expect Texas Roadhouse openings and three domestic JAGGER's openings. In 2025, we believe value will remain top of mind for the consumer and it was a focal point for our operators during our recently completed menu pricing calls. Based on these calls, we will be implementing a 1.4 menu price increase at the beginning of the second quarter.

We are confident this level of pricing maintains our everyday value, which has always been one of our competitive advantages.

Also to address evolving consumer beverage, And contribution to our product mix and early indications are positive. Our technology initiatives this year will primarily be a continuation of our 2024 projects. We expect to complete the conversions of all locations to a digital kitchen by the end of the year. These conversions are creating a more efficient kitchen and a less stressful environment for our roadies. We will also continue upgrading the guest management stand. These upgrades are allowing us to quote more accurate wait times and improve seating utilization. While we are talking today about our 2024 results, our operators turned their attention to twenty twenty five months ago. They remain focused on what we believe is the most important to our guests, fresh, made from scratch food, high level hospitality, and everyday value. We are confident that they will deliver with a little rowdy enthusiasm another year that will make our employees, guests and shareholders proud Now, Chris, will provide some thoughts. Thanks, Jerry. There certainly is a lot about 2024 to celebrate. The tremendous efforts of our operators resulted in a same store sales increase of 8.5% including 4.4% traffic growth Also, full year weekly sales averaged 159,000 at Texas Roadhouse, 119,000 at Bubba's 33 and 71,000 at JAGGER's.

And this momentum continued on the bottom line with meaningful margin dollar improvement for all three brands. The end result of this performance was a total return of 44% for fiscal year twenty twenty four. Consisting of 42.5% EPS growth and a 1.5% dividend yield. Additionally, we ended the year with over $245,000,000 of cash and generated over $750,000,000 of cash flow from operations. This allowed us to once again self fund all of our capital allocation priorities. Including $354,000,000 of capital $163,000,000 of dividends and $80,000,000 of share repurchase Moving on to 2025, our guidance for wage and other labor inflation remains unchanged at 4% to 5%. It will largely be driven by state mandated wage increases the impact of the recently completed franchise acquisition and higher benefits expense. Turning to commodities, we are updating our 2025 inflation guidance to 3% to 4% based primarily on updated cattle supply expectations which now project a tighter supply in the back half of 2025 than originally anticipated. For 2025, our capital expenditure guidance of approximately $400,000,000 remains unchanged. This amount does not include the $78,000,000 used at the beginning of 2025 to complete the previously mentioned acquisition of 13 franchise locations.

We have a full pipeline of new restaurants for all three brands as well as a good number of bump outs, cooler additions and other projects planned for the year. We will also be relocating as many as nine of our higher per performing Texas Roadhouse restaurants to new larger locations with more parking. While building new restaurants and maintaining our existing locations, remains our top capital allocation priority we are also allocating capital for other key initiatives, including the aforementioned franchise acquisition. Additionally, today, we announced an 11% increase to our quarterly dividend and a newly authorized $500,000,000 share repurchase program. With a full development pipeline, strong balance sheet and healthy cash flow trends, we are well positioned for another year of solid growth and shareholder returns. And now Michael, will walk us through the fourth quarter results. Thanks, Chris. For the fourth quarter of twenty twenty four, we reported revenue growth of 23.5% primarily driven by a 6.6% increase in comparable average unit volume and 13.7% store week growth. We also reported a restaurant margin dollar increase of 37.3% to $243,000,000 and a diluted earnings per share increase of 60.1% to $1.73 These measures were positively impacted by an additional week in our December period which resulted in fourteen weeks in the fourth quarter of twenty twenty four compared to thirteen weeks during the fourth quarter of twenty twenty three.

We estimate the additional week positively impacted diluted earnings per share growth for the fourth quarter of twenty twenty four by over 20% and full year 2024 by approximately 5%.

Average weekly sales in the fourth quarter were $154,000 with to go representing $20,000 or 13% these total weekly sales, Comparable sales increased 7.7% in the fourth quarter driven by 4.9% traffic growth and a 2.8% increase in average check. By month, comparable sales grew 8.36.97.9% for October, November, and December periods respectively. And despite the impact of weather and calendar shifts, comparable sales for the first seven weeks of the first quarter of twenty twenty five were up 2.9% with our restaurants averaging sales of over $157,000 during that period. Also, please keep in mind, because of the fifty third week in twenty twenty four, our comparable sales growth in 2025 is based on a different set of weeks than what is included in our 2024 reported restaurant sales. This mismatch of weeks will result in comparable sales being as much as 1.5% higher than average weekly sales in the first quarter. In the fourth quarter, restaurant margin dollars per store week increased 20.8% year over year to approximately $26,000 Restaurant margin as a percentage of total sales increased 172 basis points to 17%. The margin improvement included an estimated 45 basis point benefit from the additional week. Food and beverage costs as a percentage of total sales were 33.5% for the fourth quarter.

The 65 basis point year over year improvement was primarily driven by the benefit of a 2.8% check increase offsetting the 0.3% commodity inflation for the quarter. Commodity inflation for full year 2024 was 0.7% which was in line with our guidance of less than 1%. Labor as a percentage of total sales decreased 10 basis points to 33% as compared to the fourth quarter of twenty twenty three. Labor dollars per store week increased 8.2% due to wage and other labor inflation of 5%, growth in hours of 2.6% and higher group insurance claims expense of 0.6%. Adjusting for the impact of the additional week labor hour growth for the quarter was approximately 2%. For the full year, wage and other labor inflation came in at 4.6%, which was the midpoint of our 2024 guidance. Other operating costs were 15% of sales, which was 82 basis points better than the fourth quarter of twenty twenty three. The leverage was driven by the benefit of the additional week and moderating cost pressures. There was also a 13 basis point positive net year over year impact from general liability insurance reserve which included a $2,700,000 unfavorable adjustment this year and the lap of a $3,700,000 unfavorable adjustment from last year.

Moving below restaurant margin, G and A dollars grew 15.2% year over year and came in at 4% of revenue for the fourth quarter. G and A for the quarter included approximately $3,700,000 of higher expense due to the additional week. The majority of the remaining year over year dollar increase was including the $1,300,000 impact of the timing of our change from quarterly to annual equity grants. Our effective tax rate for the quarter was 15.8%, Our full year 2024 income tax rate of 15.3% was in line with our guidance of approximately 15% Our forecast for the full year 2025 income tax rate remains unchanged at between 1516%. Now, I will turn the call back over to Jerry for final comments. Thanks, Michael. There's no doubt that 2024 was a great year for Texas Roadhouse. As we turn our full attention to 2025, we will remain dedicated to the principles that have served us well for over thirty years. Our operators are committed to delivering on our mission of legendary food, and legendary service each and every shift. We will uphold our core values of passion, partnership, integrity and fun with purpose in order to continue providing high level hospitality to our guests.

And staying true to our mission and values will lead us to delivering on our purpose of serving communities across America and the world. Finally, Texas Roadhouse celebrated its thirty second birthday this week and I want to thank all of Roady Nation for their many contributions to our success.

Yeehaw.

That concludes our prepared remarks. Sarah, please open the line for questions. Thank you. Your first question comes from David Tarantino with Baird, your line is open.

Hi, good afternoon.

Was hoping maybe you could provide some context on the quarter to date trend you're seeing in Q1. I know you mentioned weather issues, those hoping maybe you could try to quantify that and and just give us some perspective on what you think the underlying trend might look like in your confidence level in returning to positive traffic growth for the rest of the year. Thanks.

Thanks, David. This is Jerry.

Our restaurants are fully staffed our food is legendary and our menu is screaming value. I do believe that there's still a very strong desire to visit our Texas Roadhouse. And I have a lot of confidence in the underlying fundamentals in strength of our business. So and we look forward to a five week period in March and there have been some other factors I think Chris will comment on some of that. Sure. David, thanks for the question. I agree with Jerry. I definitely feel good about the business overall. Let's see if I can provide a little more detail on the sales trends over the last seven weeks. So for the four week January period, David, we were actually up 5.5% That included an approximate 1% benefit benefit from New Year's Day being in our comp sales in 2025 and not in 2024 but it was more than offset by approximately a 2% negative impact from snow causing store delays or store closures rather. So that's just in the month of January. Sales in the most recent three weeks were basically flat and while those while sales during Valentine's week were strong, we actually had over a 2% negative impact by Valentine's Day shifting from a Wednesday last year to a Friday And you know that we don't attempt to to quantify the general impact of cold weather.

But we certainly believe that colder weather and many other external factors this year have negatively impacted recent performance. So you just kind of put all that together, and we're conservatively estimating at least a 1.5% negative impact to the reported seven week sales growth from calendar shifts and store closures and that's without including any general impact from the cold weather. Bottom line again, we feel really good about the core business across all three brands and we've seen an excellent performance in spite of the obstacles over the last few weeks. Very helpful. Thank you. The next question comes from David Palmer of Evercore ISI.

Your line is open.

Thanks. Good evening. Thanks for all that detail before on sales. Maybe switch my question to one on inflation. You mentioned that the change in estimates to 3% to 4% or that I guess it was about a point increase in that estimate. And that was all beef. How much How much visibility do you have on your costs this year? And maybe give a sense of the how those margin trends or those that food cost line will trend through the year?

Hey, David, it's Michael. Thanks for the question. Yes, I mean, I'd say the majority of the increase is driven by beef but there was also a little bit of it driven by some other proteins and a few other items but largely the view on BEAT in the second half of the year it was driving the increase there. We do have about 40% of our overall basket loft for the full year. We certainly have more locked in the front half of the year than the second half of the year. So, you could say we have a little bit more clarity earlier in the year. As far as the cadence of the commodity inflation, probably would see our [indiscernible] in the first quarter, maybe at or could be a little bit below the low end of the range. And then a fairly consistent inflationary outlook for the rest of the year that will get you into that 3% to 4% Thank you very much. The next question comes from Brian Barbour of Morgan Stanley.

Your line is open.

Yes, thanks. Good afternoon, guys.

Maybe just as you think about kind of margin drivers this year, I mean, Michael, you talked a little bit about I think some OpEx favorability. Is that something that you would still expect this year? And on the labor front, as you think about kind of our growth relative to traffic, would you expect kind of similar to what you saw in the second half of this year? Maybe just comment generally on how you see kind of margins evolving this year?

Yes. Thanks for the question, Brian.

So as we sit here now and the trends that we saw in late 'twenty four, I think we have an opportunity to get some leverage on the other operating line. Obviously traffic trends will play a role in that But yes, with the moderating costs we've seen and yes, you could see some leverage there. As far as the labor hours, to traffic, Still a lot to learn here in 2025, but early indications have us maybe expecting to be somewhere in that could be a little bit below 50% is possible. Again, we don't have a labor model. So things can vary and some of that will also depend upon what the traffic growth looks like. So our operators are staffing their restaurants for the sales they have and the sales they want. And we feel good about that.

And obviously, we think 4% to 5% commodity inflation, I'm sorry, labor inflation. So that could put a little bit of pressure on the labor line probably more in the front half of the year than the back half.

Thank you.

The next question comes from Sarah Sanatore with Bank of America. Your line is open. Thank you very much. So just a First quick housekeeping. Could you talk about the components of the comp? I just want to make sure we have traffic and mix and price pulled out because Jerry mentioned positive trends from mocktails and I was just wondering if you're starting to see that mix positive, that's sort of fully offsetting some of the shift away from alcohol? And then I'll have another question, please.

Thanks, Sharon. You're talking about the fourth quarter, correct?

I am, yes. Yes. So we have the 7.7% sales growth with traffic of 4.9%, the check being up 2.8%, implies about 30 basis points of negative mix as we were carrying 3.1% pricing It's still it's basically the same story you've heard from us. Alcohol being negative is driving that mix and we're seeing some benefit that offsets that negative alcohol mix from from entrees and other items. Mocktails are in still kind of in the early phase, especially in the fourth quarter. So while a positive contributor, it's a pretty small piece at this point. So we'll see where the mix goes. In 2025, but still seeing some negative alcohol to start off the year? If I look at the comp restaurants with maybe some of the higher volumes in the brand new ones and then it eases and then as you sort of steady state goes back. Is that the right way to think about them, which is you see maybe honeymoon and then then over time very strong positive same store sales, but the opening volumes tend to be quite high for both.

Yes, Cheryl, that would be correct. They both have similar patterns that way of opening in that honeymoon period. Probably see a little bit more of a honeymoon on the roadhouse side than the Babbo side. Again, that probably just goes to thirty plus years of name recognition. But in both cases, they open at some some great volumes. And then over those first three to six months that they tend to trend down a little bit. And as they're entering our comp base, we see them beginning to grow on a year over year basis.

Okay. Thank you. The next question comes from John Tower of Citigroup. Your line is open. Great. Thanks for taking the questions. First, clarification and then a question. The clarification is nine or so relocations that you spoke to Chris, those are not included in the 30 new restaurants openings in '25. Is that accurate? That is accurate, John. Great. Awesome. The question that is over the past year and particularly starting 2025, the industry has certainly grown more promotional and understanding that Texas really does doesn't use traditional media methods to advertise. And stay in front of the consumer. Can you dig into what exactly the company is doing to remain top of mind for consumers? I know you're doing a lot of things at the local level, including even sponsoring monster truck rallies and such. But can you delve into kind of how you're staying in front of consumers in markets? Yes, John. Thanks. This is Jerry. I think first of all, we have a few approaches that we take. We have a low [indiscernible] shake hands and do bread runs. But every one of our restaurants has an early dine feature that has a 11 or 12 items that are at a discounted price during the early hours of that.

We have Wild West Wednesday that we talk about that we've been talking about and prepping on potentially implementing that. Throughout Moore. We've got a $5 all day everyday drink menu that we've implemented last year. Which is a 10 ounce margarita that we brought back and And so we have a $5 10 ounce Margarita, which was really a superstar for us for a very long time in the early days. And and then a $5 pint beer and a $5 Long Island Texas. And then then as we blend in these mocktails at $5 also, it is appealing to a different consumer. So the mocktail has really performed well for us overall. It is very early on, but we have a few things that we can again and a lot of value is already built into our menu and and as we focus on that. And again, I think we operate at a high level We can the consumer trust and believes in what we're doing and we can get out there and scream louder when it comes to early dying while West Wednesday in our our five day all day every day drink value menu that has been implemented last year.

Got it.

For taking the questions.

Thank you.

The next question comes from Brian Bittner of Oppenheimer.

Hey, thanks. Hey, guys. As it relates to pricing in 2025, once you put the 1.4% action in place, Just can you clarify, does that math put you in the 2.5% pricing run rate range from there? And is that what we should expect the rest of the year? Just clarify that. And if that's the case, do you want us anticipating maybe a little bit of deleverage on the [indiscernible] your updated commodity outlook maybe maybe offset by some leverage on that other operating line? Hey, Brian, it's Chris. So we're at 3.1% through the first quarter of twenty twenty five.

And then 2.2% will roll off at the end of the first quarter and that's being replaced by the 1.4% that Jerry announced earlier today. So that gets you to 2.3 starting in the second quarter. And then we have another opportunity to come at that in the fourth quarter, but we'll take a look at the end of the third quarter 0.9% would be rolling off. So we'll have another set of conversations with our operators at that point in time.

And in terms of how we're thinking about that, I mean, the I think Michael talked about the different areas of the income statement where we're there's some pressure and some things that we're looking at, where we have our guidance is out there. But a lot of it matter a lot of what matters is our guest counts. And as the guest count comes in, if we can outperform there, then that helps with the margins. And if it doesn't, then that can compress it a bit. And I'll let Michael add to that.

And Brian, on that COGS line specifically, with the update from 2% to 3% to 4%, commodity inflation, I would the math would imply some delevering of cost of sales, as you move through the year, maybe not in the first quarter, but certainly into the second quarter in the back half of the year with kind of where the guidance is today. Okay.

Thank you.

The next question comes from Jake Bartlett of Truist Securities. Your line is open.

Great. Thanks for taking the question. Mine was on the guidance for company owned development of 30 stores in '25. And I look at what you did in 2024 at Roadhouse your 26 openings, it was the most in quite some time and going back to 02/2008. So it shows you can do it. You have [indiscernible] on the cusp potentially of accelerating development at Bubba's. So you put those two things together and seems to me like like maybe you could be a little bit north of the 30 stores in '25. What's wrong with that thinking? Or maybe there is some potential conservatism in your guidance?

Jake, this is Jerry.

Yes, I'll tell you, we focus on 20 to 25 road houses every year and In '24, we were able to get four Bubba's open. I believe we have seven on our report for '25 and we're continuing to try to get a little north of that as we get into '26. And so that's kind of the approach that we really take. We like to be in that 30 ish number. I believe that opening restaurants and hiring 200 people and a management team and all of the time and effort that we put into it, that's a right number for us to really open a quality restaurant at the volume that we're at. You only get one time to make a first impression and we put a lot of time and effort into those openings. So I want to be very cautious of trying to open that up too much. I'd rather be very good at opening 25, 30 restaurants on a normal basis and a good cadence with two brands And then as we blend in JAGGER, as we continue to focus on that down the road, it and obviously [indiscernible] Sometimes we will creep up a little bit, sometimes we'll be maybe a little low, but that that's a really good number in a space for us to be in.

To open quality restaurants, and make a great first impression.

Great. Thank you very much.

Thank you. The next question comes from Jeffrey Bernstein with Barclays.

Your line is open.

Great. Two questions. The first one just on the the quarter to date comp, just to clarify, I know you reported a 2.9 and Chris, I appreciate all the color. It sounds like you're saying maybe 150 basis point headwind from weather and shifts and whatnot. So the true trend is maybe a 4.4 or so But just looking at your monthly comps, once you get past January, for better for worse, your compares become 500 basis points harder starting in February for the rest of the year. It seemed like January was the the easiest compare for whatever reason. So as we think about the rest of the year, barring any major change in the consumer, is it fair to assume that the 25% comp would be much more tempered from the 8.5% I think you did in 2024. Wondering whether you would agree with that or whether there's something wrong with that logic and whether within that you've seen any sign of changing consumer behavior above and beyond just the weather and the holiday shifts? And then I had one follow-up.

Hey, Jeff, this is Michael. I'll try to address that one.

So think you have to be a little careful trying to compare it to the same store sales growth 'twenty four because of a different level of pricing. So I'll adjust the question a little bit and we have 4.4% traffic growth in 2024 and and will we see something like that again in 2025? I don't think we can answer that. I'll tell you our operators are staffed and ready to to serve the guests. They're out there building those relationships We're seeing our highest volume stores growing at the highest rate. So we think everything is in place for us to continue to grow and serve more guests. How that will exactly play out, is a little still to be determined and but we're ready to serve the guests. Yes.

And I'll just add on to that, that If you just looked at January, we were continuing the role. So So I think that felt really good. And these last three weeks have been breathtaking in terms of all of the things that have come against come against the business. So and we're still flat. So I'd still feel pretty good about that. Our progress this year.

Got it. And then my follow-up was just on the the new units. You mentioned you're going to be opening up your 800 in total, which know it's more like $6.50 for the pure Texas Roadhouse brand. Wondering if you could just give us an update in terms of where you currently see that ultimate opportunity, it seems like the number keeps going higher as you're having success in smaller markets. And if you could maybe just share some of the metrics around the cost to build and the margins and returns on those new units and other cost to build have been running higher, but just any color on that would be great. Thank you.

Yes, Jeff. I'll start off. Yes, our target is still 900 for Texas Roadhouse Texas we'll continue to evaluate that over time. But we feel very comfortable with that number, which we upped it from 700 to 800, I think, a couple of years ago. And we are excited to have the number 800 within the whole portfolio, including SXSWROADHOUSE, Bubba's, JAGRs and International So as well on our way to some of our internal goals of 1,000 between the brands. So but if any of the additional costs, I'll let Michael speak to that for just a little bit. Yes. Jeff, for 2025, we're expecting the average investment cost to be about $8,500,000 gone, dollars 8,600,000.0, it's an all in investment cost including a 10 times rent factor for for both Texas Roadhouse and Bubba's. And on the Bubba side, that's really flat with $20.24. For Roadhouse, that's up a little bit.

And some of that can has to do with where the locations are. You do a few more in in California with higher rents or higher building costs, that can shift it a little bit. So we still very so feel very comfortable about meeting or exceeding our target which is a mid teen IRR for new store development and we watch that very closely and still are meeting or exceeding that So we think we have still tremendous opportunity there.

Thank you.

The next question comes from Gregory Francfort with Guggenheim Partners.

Hey, thanks for the question. I was wondering if you just give a little bit more color on the wage inflation and what you're seeing there? It's ticked up kind of each of the three quarters of this year and running above not above, but at the high end of your guidance for next year at 5%, maybe lapse in comparisons? I guess what are you seeing kind of at the the store level or the operator level that may give us a better look at that? Thanks.

Yes. Hey, Greg, it's it's Michael. I can talk to that. So certainly, again, we guided to 4% to 5%. We came at a 4.6%. And some of those things are the higher Q4 may have been contemplated and there is a little bit more wage inflation at the end of the year and early in the year where you see some state mandated changes coming into effect. But we think the underlying wage inflation has peaked and so whether it's going to come down I don't know about that. But not really seeing a large upward tick in the wage inflation and certainly health insurance costs and the premiums associated with that So the benefits that we offer continue come at a higher price and that's factored into our assumptions. But at this time, we feel very good about being in that 4% to 5% range for 2025.

Thank you. Appreciate it.

The next question comes from Dennis Geiger with UBS.

Great. Thanks, guys. I'm curious how you think about your traffic outperformance gap to the industry. Outperformance is been significant for a while. You expanded it pretty notably last year, I think. I know it's more the output of all the work that you and the team the teams do, but do you think about that going forward at all, that traffic gap as you make decisions on pricing or otherwise? And And if you do think about it, any view on what that gap looks like going forward or any kind of broad thoughts on the gap?

Thank you. Thanks, Dennis. This is Jerry. We always are trying to do the best that we can and stay with the value that we build into the menu and if the gap that you're talking about, our competitors, we do try to pay attention and be educated and that's part of those phone calls that we make with our operators in their local communities and it's important for us to be a very value based offering that operates at a very high level. So I think we'll always try to be very competitive in that side of it as we have been in the past. And we'll keep that conservative approach as best we can and believe that we're doing right by our consumer and yet taking care of our business at the same time. Thank you. The next question comes from Lauren Silverman with Deutsche Bank.

Your line is open. Thank you very much. Wanted to follow-up on the quarter to date trends. In February, particular being flat do you think is driving the step down in comps relative to January? Is it weather that's worse tucker compares? I think we're all trying to discern what's driving the fall off. Just broadly differences you can share across regions to provide a bit more insight? Thank you.

Hey, Lauren, I'll start and Michael may have some other thoughts as well. But Yes. I mean, you've had now more I think a dozen named winter storms this year and they've gone across geographies. They've gone broader than what we've seen in the last several years.

You've had flu and COVID and RSV and schools closing and entire communities being shut down, And it's just it's been across the country and there certainly have been some areas of the country hit harder than others, but that's really when we talked about other external factors, those are just a few. That we're seeing. And I really feel like that that's what's driven a lot of the results for that three week period. But again, having said that, I mean, our operators are still I mean, they're running fantastic shifts. They're doing a great job. They're serving our customers. We had a fantastic Valentine's Day. So there's a lot of positive to pull out of all that, but I really think there are there have been a number of factors that have hit us.

Yes. And Chris, you hit on that and I'll reiterate again. The Valentine shift had a 2% or more impact on those three weeks of our February period. So and so we're not even trying to measure the impact of cold weather and of these other factors that Chris mentioned. So we'll So we think some of those are just out of our control. When I look at our our regional trends, it makes me feel the same way Chris is talking about that the underlying trends are good. Our The Western U. S. Certainly has outperformed in the first part of the year and that's an area maybe is either used to winter weather a little bit more or hasn't been as impacted by some of the snow that has moved across the country. So I look at the West as an example of maybe what the more normalized numbers are. And I said it a little bit earlier, but our highest volume stores are still growing at a nice rate. And so I don't believe any of this is slowdown in the guests or the consumers desire to come to Texas Roadhouse. I just believe we're in a little bit of an environment right now where the consumer is just acting a little bit differently and I think you're hearing that from others as well?

Thank you for that. And then if I could just ask on the commodity inflation step up to 3% to 4% in the back half, but I guess 2Q to 4Q. As we exit 2025 and go into 2026, is that the right way to think about it? Are you at the end of the basin at the same period of elevated [indiscernible] and remind us how long it takes to sort of rebuild herd Thank you.

So Lauren, two parts in there. Unfortunately, I'm not going to have a lot of of we're just starting off 2025 here. So not even trying to venture into what 2026 could look like. There's supply issues, demand issues that all play into that. But to your second part of the question is, it does take a little bit of time to rebuild the herd. You need to see ranchers retaining cattle for breeding, We have not seen a lot of that happening yet. So we will it would not be surprising to see us remaining in a cattle cycle for some time now. Now what that means to inflation or to prices, there's a lot of other factors that play into that. So that's why as much as we can provide on '26 and beyond at this point.

Thank you very much.

The next question comes from Andy Barish with Jefferies.

Your line is open.

Hey, guys. Just wondering on the guest management you know, update or two point zero. I mean, could it be in certain markets or obviously restaurants that just the quote times are getting a little bit lofty given how busy you guys are and is there something tied together with the the digital kitchen that kind of can work on maybe bringing wait times down a little bit, just Just wondering if that's something where you've seen some guests kind of walk out at a certain point.

Hey, Andy, it's Jerry. Yes, I think our AGM two point zero is a soft that we decided to work on ourself and customize it to handle some of those longer waits. And obviously, as we continue I believe we're close to half of our of the concept has got that upgrade. And we will continue to focus on the digital kitchen rollout and the AGM two point zero and and after they are completely done, then we can really evaluate some of the things that the whole concept can gain from. But I think it's really about table efficiencies, It is about that wait list management side. So So we're feeling very good about where it's at and what it's doing. And more importantly, our operators are wanting it. They see the value in it and that's really the driver behind both the digital kitchen and the AGM2 point zero. So we feel very comfortable going forward.

Thanks, Terry. That's great color. And just one quick follow-up.

Michael, on Easter being later this year, is there anything we should think about between 1Q, 2Q, March, April, longer later length or anything?

Yes.

So this is this is a good one. So Easter is in our fiscal second quarter for 2025 and 2024. However, it is when we give you all comparable sales for the first quarter, we will compare the thirteen weeks of 2025 to the comparable weeks of 2024, which are weeks two through 14, Easter was in week 14 in 2024.

So the Q1 comps will probably have about a 30% sorry, a 30 basis point benefit from because Easter is not a higher volume day for us, So the Q1 comps 30 basis point benefit from having no Easter in Q1 of twenty twenty five but having it in 2024 and then the reverse will happen in the second quarter, about a 30 basis point headwind to comps from it being in our 2025 base, but not in our 2024.

Perfectly clear. Thank you. Thanks, Andy.

The next question comes from Andrew Strelzik with BMO.

Hi. Thanks for taking the question. I wanted to ask you about the off premise business and recently you indicated that the operators have kind of growing confidence in executing in the quality of that channel and maybe increasing willingness to put more focus behind it to drive growth. So I guess I'm curious if there's anything planned or that we should think about for 2025. If you see that as an incremental growth opportunity for this year, is that more kind of a longer term opportunity that you you would view that Hey, Andrew, it's Jerry. Yes, I think we're going to hold our position. We do like it being available for our JAGGER concept and as we get closer to completing all of the Bubba's locations with it, And we do have the one Texas Roadhouse, but as of right now, we will continue to hold on that side of it and see where we go. But we're talking about to go or off premise from that side of it.

Delivery?

Yes. [indiscernible] The Tiggo side.

To go side?

Okay.

Michael will share a thought on that.

Yes. I mean, our to go as we we continue to see great demand on the to go side and seeing increased occurrences, the percentage 13% was up year over year. So it continues to be something that the guests appreciates and I think our restaurants have our operators have gotten better about executing on the to go and having the the plans in place, they know how important it is to quote accurate wait times and make sure everything's in the bag and we just keep getting better and better at that and the guests appreciating that. And coming back for more.

During the first seven weeks of this year, we've seen more to go And again, that's likely because people are not being able to come in and dine somebody and the family may be sick. And so we've seen some more some definite improvement in that. Regard as well. Great. Thank you.

The next question comes from Jim Solaro with Stephens. Your line is open.

Yes, good afternoon. Thanks for taking my question.

I appreciate all the color around year to date sales trends and the traffic component in 'twenty four. We think about the drivers of the traffic performance in 2024 in kind of the composition between existing guest frequency and then new guests coming to the brand because of the value proposition. You have any way to quantify how much each of those contributed and then maybe the way you're thinking about either increasing the frequency of those new guests in '25 or continuing to bring new guests into the pipeline in 2025? Yes. Hey, Jim, it's Michael.

So that is something that's pretty challenging to be able to separate out. I do believe we continue to see our existing gas continue to come and dine with us and the goal of our local store marketing program is to to attract new people into the restaurant. As well. And I think we will continue to work on doing that. And that's why we stay very true to who we are and very much focused on the guest experience. So we give that legendary experience to each and every guest. I don't know if necessarily anything we want to be doing differently in 2025, except continuing to screen the value proposition and provide a great experience for those those guests who are choosing to come in and dine with us.

Okay. And maybe if I could ask a quick one on Bubba's too.

We've seen a lot of kind of value centric messaging from other full service operators, particularly around like burgers and wing deals, Have you ever given out the average at Bubba's? And if not, how do you feel like that stacks up? Relative to some of the other value offerings we see in full service particularly around those like I said like burger and wing options? Yes, Jim, this is Jerry. Feel really good about our pricing on the Bubba side with the burgers, the pizzas and the wings. And and really just in general menu. So we do a lot of work on that side of it too. We do have a Monday night where we have a burger special and then we do focus on a Tuesday night pizza special and knock a little bit off of there. But it really is the quality and the variety that you have to choose from that I think really, really makes it stand out. And the burger is the star of the show over at Bubba's thirty three. And Jim with pizza being a component of the check, that's all it makes it a little bit harder to give an accurate per person average, but it's probably more in the $20 per person.

But again, it's a little bit harder to get to a fully accurate number [indiscernible] Given the pizza?

Appreciate the thoughts there. I'll pass on.

Thank you. The next question comes from Logan Reich with RBC Capital Markets. Your line is open.

Thanks. Good evening guys. Thanks for taking the question.

Just a quick one on the consumer and any sort of changes you guys are seeing in different demographic or income cohorts Are you guys seeing anything different recently And then if you could just comment on anything you guys are seeing on your guys' sort of value proposition relative to what consumers are seeing in the grocery store? Hey, Logan, it's Chris.

We don't really break it out in that regard. And so we're really not seeing any sort of change in behavior. There's not any matriculation close more into the value part of the menu or anything like that. Everything has been proceeding as it has been historically for us at least over the last couple of years.

And we are we do watch the grocery prices and we are certainly mindful that that that's one of our competitors is the ability to cook at home. And so we certainly have that in mind as we have those conversations that Jerry talked about with our local store operators. And we want to we've said screen value three or four times today. Want to continue doing that and that is in part why we're very mindful about these price increases and keeping them modest. We are competing on a number of [indiscernible] but also at the grocery. And so we're watching that as well. Great. Thank you very much.

The next question comes from Peter Saleh with BT your line is open.

Hey, great. Thanks for taking the question. Kind of in the same vein, I think in the past when we've spoken about the commodity basket and beef inflation, one of the factors that went into determining the amount of inflation or lack thereof was the amount of demand in the grocery or promotions in the grocery store or retail Just curious if you guys are seeing incremental promotions in the grocery aisle is that factoring at all into the increased commodity inflation basket that you're expecting for 2025? And then also anything we should be aware of on tariffs, any exposure to Canada and Mexico Texas all?

Okay. So I'll this is Chris. I'll start with with what we're seeing in grocery and then I'll let Jerry speak to the second part of your question. Right now, and you're correct, as we looked at 2024, the fact that the grocery stores were not putting specials on things like rib eye and other cuts of beef did seem to dampen some of the demand from the retail side and that helped with the cost picture for us during 2024. We haven't seen anything demonstrably different in 2025 thus far.

And really what we were looking at in terms of moving the guidance up was really just what we're seeing from our our procurement team and what they're talking about with our with our suppliers and what we understand is going on in the beef market. [indiscernible] that's the main driver there. So nothing has changed in terms of what we're seeing at least so far at grocery and in terms of running specials.

Yes. And then on all the other things that are being discussed out there, we're very well aware our contacts in Washington DC keep us posted on any of the activities and the talks that are going on. Again, we won't know until for sure that those things come through. But we are paying attention. We are trying to keep our ear to the ground and and be aware of anything that would have a impact in the business in any way, shape or form.

Great.

And then could I just follow-up on the share buyback? I know a new authorization Any thoughts on how aggressive you guys would be with this buyback? You have plenty of capital. Sitting on the balance sheet. Just curious as your thoughts given where the shares are today?

Sure. And it's Chris again. Share repurchases remain a part of our balanced approach. To the capital management program and we've been consistent, but we've also been opportunistic at times. And we're going to continue to have that approach with regard to all of our returns to shareholders. And so so it's good to have that authorization from Jerry and the Board.

And we'll be thoughtful as we move forward, but we're going to be balanced and we're going to continue that process.

Thank you very much.

The next question comes from Chris Your line is open. Hi. Thank you so much for taking the questions. So I would like to discuss your strategies in growing your portfolio of of brands. So Texas Roadhouse, Papa's, Jagger's, all quite unique concepts. But are there any major synergies, leverages on P development or operations that is helping these younger brands move faster on the ramp up curve and also potentially replicating the exceptional guest experience, Texas, Texas it is is famous for. Thank you.

Well, thank you. I appreciate the kind words We do take the approach of there's obviously our company that supports all three brands and the resources that we use to help create each one of them. Obviously, we're heavily on Texas Roadhouse, but as we start to find our way to support each brand separately, that's really the driver in understanding each one of those businesses. So whether that impacts the growth or not, I think we could continue as we get more. It's about do we have the right people in place do we have the right growth strategy and are we able to execute at a high level. So I think as we look at we figured that out at Roadhouse long ago and as we continue to look at the Bubba's brand and the Jagger's brand and the resources that we need to consistently get great restaurants open and to be able to open more is something that we've continued to look at as we have a header operations for Roadhouse and head of operations for Bubba's and a head of operations for our Jagger's business in international. So as they report to us and what their needs and wants are and how we invest in their businesses, It's got to be about the people and it's got to be about the operation and we feel great about the food and the service model as you mentioned, but it's really about us being able to grow successfully and get it right off the bat.

The next question comes from Jim Sanderson with Northcoast research. Your line is open.

Hey, thanks for the question. I wanted to ask a question about your pricing philosophy. I'm wondering is that as we progress through the year and you start to see fluid and food inflation pick up, if you would be more willing to take your prices up to protect margin or if you'll need to see more visibility on traffic accelerating before you get to that point? And then tying into that, I wanted to clarify if that 2.5% run rate will remain intact on pricing throughout fourth quarter twenty twenty five or if there is another roll off later this year. Thank you.

Thank you, Jim. We're always going to look at pricing from a conservative lens and try to make the right decision. We've made the decision for the second quarter We will revisit that with our operators at the end of the summer and and really discuss what the back half of the year and what the climate will be dealing with at that point in time. So those will be the driving factors on the next conversations as we go through there.

And Jeff, I'll just cover it for you. You. We have 3.1% in the menu through the first quarter.

Then that drive with the 1.4% that Jerry announced today 2.2 rolls off, but starting in the second quarter you have 2.3 and then at the end of the third quarter, 0.9 would roll off.

And that is our opportunity as Jerry was just describing to perhaps come back in with something that replaces that 0.9. But going forward starting in Q2, we'll be at 2.3%.

Very good. Thank you very much for that.

Thank you.

The next question comes from Brian Vaccaro with Raymond James. Your line is open.

Hi, thanks. Just two quick ones if I could.

First, can you level set up on your G and A expectations 2025?

And then second, I just want to ask about delivery. You bought this away from third party delivery historically, but just given the strength in your off premise demand for your brand and some changes that we're seeing on the first party delivery side. Curious if you're giving any new considerations potentially getting into the first party delivery, just so you have a sense the potential opportunity there?

Thank you.

Hey, Brian, it's Michael. I'll answer the G and A question and I'll hand it over to to Jerry on the delivery. G and A, so I think you would potentially see little bit have some growth in the first half of the year, and then some opportunities to be more flattish into the third quarter and as we lap the fifty third week in the fourth quarter, you could actually see the G and A dollars go down in Q4. So As of now, maybe mid single digit dollar growth for the year, which should ideally get you some leverage on the the G and A line, but probably more so in the back half of the year than the front half of the year on the leverage.

And then Brian on the this is Jerry on the third party, Will like I said, we we have it in Jagger's, we have it in Bubba's, we it in One Roadhouse and we're continuing to learn on it, but that's probably where we're at right now.

The next question comes from Raul Crossipalli with JPMorgan. Your line is open.

Hi, guys. Can you share some color on the bump outs? How much seating capacity has been added on average per store that went through? And also what percent of buildings have land availability for more bump outs after 2025?

Yes, Ro, I can answer some of that. I mean typically a bump out is going to add anywhere from probably 20 to 40 seats. Some of that is going to depend on what you mentioned, the land availability, how how much property can we use to add more seating We've bumped out over half our system A lot of the restaurants that we haven't bumped out are because you don't have the real estate or you're not going to get the approvals from landlords or other businesses around you So I don't have a number as far as Yo, what? Who could or couldn't, but I can tell you we have a nice pipeline of restaurants that have been approved for bump outs and we don't bump a restaurant out till it's been open for at least a few years. So that pipeline naturally keeps rebuilding its [indiscernible] Arold, it's Chris.

The only other thing I'm going to add to that is that we're now building our new stores with the footers and with some capacity to do bump outs. So we have that in mind and we're getting some of that cost out of the way so that we can do that once they've earned their bump out. And so that allows us to kind of plan ahead least on the new stores as well.

That's helpful. And I have a follow-up on the remodels. It looks like around 60% of your roadhouse units are more than ten years old. Could you break out like what percent of these old assets need like more capital intensive or full scale remodels versus lighter capital refreshers? And how do we think about the schedule over the next Hey, Raul. We really haven't released that kind of information. I will tell you though that we do have the intention on keeping our stores fresh and enjoyable for our guests and also enjoyable and safe for our employees. And so that's why we've been we've been going at a pretty good clip on getting that done. And of course, you know us and so you also know that there's not going to be a top down program that says, this is when you have to do X, Y or Z to your store. We're going to hear from the operators, we're going to hear from them in their stores and and then they're going to talk to us about what capital is available. So we feel pretty good about the investments that were being made. And and we feel good about when you walk into just about any of our stores, you're going to see a really fresh, clean, wonderful operation and you're going to be treated extremely well and you're going to have some legendary food.

And for the update guys, This concludes the question and answer session. I'll turn the call to Jerry Morgan for closing remarks.

Thank you all for your continued support. I appreciate all of you in Rodey Nation and all of our guests that continue to dine with us. Let's go, Roadhouse.

This concludes today's conference call.