Texas Roadhouse Beats in Q3

Texas Roadhouse Inc. (TXRH - Snapshot Report), a casual dining restaurant chain, recently reported third quarter results that topped the Zacks Consensus Estimate on the heels of lower commodity and pre-opening costs besides a jump in the top-line.
 
Earnings of 15 cents a share surpassed the Zacks Consensus Estimate of 12 cents and climbed 27% year on year. On account of better than expected results, Texas Roadhouse raised its full-year guidance and now expects earnings to rise 20% as against the 5%−10% previously anticipated.
 
For the fiscal 2010, management expects EPS growth to be flat to 10%, if comparable restaurant sales lie within the range of (2%) to flat.
 
The growth in the top-line decelerated. After climbing 12% in the second quarter, total revenues showed a sluggish growth of 4% to $226.5 million in the reported quarter. Restaurant sales jumped 4% to $224.4 million, whereas franchise royalties and fees ascended 2.7% to $2.1 million.
 
Like other casual dining restaurant operators – Cosi Inc. (COSI - Analyst Report), Red Robin Gourmet Burgers Inc. (RRGB - Analyst Report), and California Pizza Kitchen Inc. (CPKI - Analyst Report) – Texas Roadhouse too has been experiencing sagging comparable restaurant sales and falling traffic as cash-strapped consumers are trading down to quick service restaurant operators like McDonald’s Corp. (MCD - Analyst Report), Yum! Brands Inc. (YUM - Analyst Report) and Chipotle Mexican Grill (CMG - Analyst Report) due to cheaper dining options, or else they prefer to eat at home.
 
Comparable restaurant sales fell 4.6% at company-owned restaurants and 3.6% at franchised restaurants. Comps fell 2.3% in the first four weeks of the fourth quarter.
 
Restaurant operating cash flow climbed 12.8% to $38.5 million, whereas restaurant operating cash flow margin expanded 133 basis points to 17.2%.
 
During the quarter, Texas Roadhouse opened one company-owned and two franchised restaurants, and closed two company-owned restaurants. Management plans to open 17 company-owned and three franchised restaurants in fiscal 2009. In fiscal 2010, it plans to open about 15 company-owned restaurants.

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