Texas Roadhouse, Inc. (TXRH) Earnings & Analysis

Latest quarter

Texas Roadhouse reported Q2 FY2026 revenue of $1.7 billion, up 11.1% from $1.5 billion a year earlier. Revenue beat the consensus by 0.29%, although both reported revenue and the estimate round to $1.7 billion. Adjusted earnings per share of $1.85 missed the consensus estimate of $1.90.

The company’s filing attributed revenue growth primarily to higher comparable restaurant sales and more store weeks, driven by openings and franchise acquisitions. Comparable sales rose 6.2% at company restaurants, with both guest traffic and the average check contributing. Diluted earnings per share declined to $1.85 from $1.86 as net income fell.

The filing said restaurant margin fell to 16.4% from 17.1%, primarily because of commodity and labor inflation, partly offset by higher sales. Food and beverage costs rose as a share of restaurant sales, principally because of higher beef costs. The company reported free cash flow of $85.0 million, compared with $38.5 million a year earlier.

Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.

What management said on the call

CEO Jerry Morgan said second-quarter comparable sales increased 6.2%, including 3% traffic growth. CFO Mike Lenihan said those trends continued into the first five weeks of the third quarter, when comparable sales rose 6.2% and restaurants averaged $168,000 in weekly sales.

In response to a question about sales mix, investor relations vice president Michael Bailen said overall mix was about 40 basis points negative in the second quarter, although dining-room mix turned positive. Bailen said mix continued to improve in the first five weeks of the third quarter, with the vast majority of pricing flowing through.

Morgan said Texas Roadhouse would raise menu prices by 1% at the beginning of the fourth quarter. Asked about the company’s pricing approach, he said it reviews pricing with operators on a biannual basis, considering conditions in their communities and what the company needs.

Lenihan said second-quarter commodity inflation was 7%, while wage and other labor inflation was 3.9%. Asked about the commodity outlook, Bailen said sirloin prices began moving lower in June and were the biggest benefit to expectations. He said the company was about 80% locked on its overall commodity basket for Q3 and about 40% locked for Q4.

On development, Morgan said the company remained on track for approximately 35 company-owned openings in 2026, with the year’s openings weighted toward the end of the year. Lenihan said the capital allocation framework prioritizes new restaurant development and maintenance of existing restaurants.

Asked about Bubba’s 33, Morgan said the brand faces more competition and is less well known, so the company needs to continue working on local store marketing. On staffing, Bailen said the company had no concerns about staffing existing or new restaurants and expected no changes to its compensation plan.

Guidance

Lenihan said Texas Roadhouse reduced its full-year 2026 commodity inflation guidance to approximately 5%, from a previous range of 6% to 7%. Bailen said the company also expected much lower inflation in the third quarter than originally anticipated, putting the updated Q3 expectation at 2% to 3%.