Texas Roadhouse's Q4 2024: Pricing Strategy and Labor Productivity Under Scrutiny Amid Mixed Traffic Growth Signals

These are the key contradictions discussed in Texas Roadhouse's latest 2024Q4 earnings call, specifically including: Pricing Strategy, Labor Productivity, Traffic Growth Trends, and Pricing Strategy and Cost Management:



Revenue and Sales Growth:
- Texas Roadhouse reported revenue growth of 23.5% for Q4 2024, primarily driven by a 6.6% increase in comparable average unit volume and 13.7% store week growth.
- The growth was attributed to strong performance across all three brands, positive traffic growth, and effective marketing strategies.

Margin Improvement and Income Growth:
- The company achieved a 4.6% increase in wage and other labor inflation and a 15% increase in the overall effective tax rate, with a full-year income tax rate of 15.3%.
- Margin improvement was supported by leveraging other operating costs and benefiting from a reduction in general liability insurance reserve adjustments.

Capital Expenditure and Development:
- Texas Roadhouse plans for approximately 30 company restaurant openings across the three brands in 2025, along with relocations and bump-outs.
- These developments are part of a strategic focus to maintain growth and capital allocation for key initiatives, including franchise acquisitions and relocations, while managing capital-intensive projects like new restaurant openings.

Commodity Cost Inflation and Pricing Strategy:
- The company updated its 2025 commodity inflation guidance to 3% to 4%, primarily due to expectations of a tighter cattle supply in the second half of the year.
- Texas Roadhouse also announced a 1.4% menu price increase for the second quarter, with opportunities for further pricing adjustments later in the year to address evolving consumer beverage preferences and commodity trends.

Traffic and Consumer Behavior:
- Texas Roadhouse reported a 8.5% increase in same-store sales for fiscal year 2024, including 4.4% traffic growth.
- Despite some external factors impacting recent performance, the company remains confident in its ability to maintain positive traffic growth, citing strong demand and underlying fundamentals of the business.