With lower beef costs and increasing same-store sales, executives at Louisville-based steakhouse chain Texas Roadhouse are expecting the company to outstrip its already positive 2015 sales numbers.
“As we overlap some of our toughest comparisons from 2015 with positive comp sales, we remain confident in our ability to drive positive comp sales going forward,” Texas Roadhouse president Scott Colosi said during a conference call with analysts. “And in addition to sales growth, food cost deflation provides the potential (restaurant) margin expansion this year.”
Food costs are expected to drop 1 percent to 2 percent in 2016, mostly because of lower beef prices Texas Roadhouse was able to lock in for the year. And same-store sales for the first seven weeks of 2016 are up already 4.4 percent compared to the same period a year ago, Texas Roadhouse founder and CEO Kent Taylor said during the call.
However, executives expect labor cost inflation this year, specifically tied to rising wages and state minimum wage increases. Texas Roadhouse estimated a 3 percent increase in wage inflation.
Still, they remain positive.
The company has more than 485 Texas Roadhouse locations and is opening 23 new stores this year, but executives said Texas Roadhouse still has a long growth runway.
In 2015, Texas Roadhouse experienced strong 2.8 percent growth in customer traffic and a 1.7 percent increase in the average ticket.
The increase is an amalgamation of factors, Colosi said, including adding seats at restaurants, great employees, third-party gift card sales, low gas prices and low rates of unemployment.
“The No. 1 correlation that we see with our sales momentum is unemployment, and all those things all come together to drive sales,” he said.
Competitive franchisees also is a big factor, Colosi later said.
“They have a lot of ownership in their sales growth, and they’re not waiting around for the next advertising campaign to figure out how they’re going to grow their business and grow their sales, and so they get after it,” he said, “and that’s a big reason why we continue to get more guests in the building.”
Executives didn’t say much about Texas Roadhouse’s sister restaurant chain Bubba’s 33, a sport bar and burger concept. The company plans to open seven new Bubba’s this year, but it is still early days for the brand.
The slow growth has led to a positive finding for the company.
“All the stores we opened last year were in direct competition with Texas Roadhouse, and we saw little effect on the sales at Texas Roadhouse,” Taylor said. “When we go in the markets where Texas Roadhouse tends to do a little better than average, we find that we have nice sales out of the Bubba’s.”
The menus are very different, he added, which is likely why there is little market cannibalization.
Texas Roadhouse also is slowly expanding internationally; it currently has 10 franchisee-owned stores in four countries. Colosi said the company expects four to five more stores to open this year, including its first in the Philippines.
In early 2017, Texas Roadhouse also will have locations in Mexico.