After last night’s Q4 earnings beat and solid comparable store sales, shares of casual dining name Texas Roadhouse (TXRH 55.69, -1.22 -2.1%) dip slightly.
Q4 revenues were only enough to meet market expectations. Texas Roadhouse saw revenues increase about 12% compared to last year to $545.1 million.
Comparable restaurant sales were up 5.8% at company restaurants, including a positive impact of about 0.4% related to the calendar shift of the Christmas holiday, and 4.7% at domestic franchise restaurants. To this point in the year, Texas Roadhouse also noted that comparable store sales growth has reached 4.7% including a positive impact of about 0.2% related to the calendar shift of the New Year’s holiday.
Texas Roadhouse’s Our income tax rate declined to 19.8% from 28.8% in the prior year mostly due to the impact of new tax legislation enacted in the current quarter, which resulted in a $3.1 million reduction in income tax expense, or $0.04 per diluted share.
In the end, Q4 earnings per share were $0.40, modestly better than the market expectation as restaurant margin dollars were up 11.9% to $92.2 million from $82.4 million in the prior year and restaurant margin, as a percentage of restaurant sales, decreased 11 basis points to 17.0%. The decrease was primarily driven by labor inflation, partially offset by the benefit of lower food costs.
Management also updated certain 2018 guidance metrics; the company now sees an income tax rate of 15.0-16.0% (from previous 28.0-29.0%) on total CapEx of about $165.0-175.0 million (from previous $175.0 milion). Management held firm on guidance of positive comparable restaurant sales growth, relatively flat food costs and mid-single digit labor inflation for the year.
The company also provided the news that its Board of Directors authorized an increase to the quarterly cash dividend. The company will now pay out a $0.25 per share dividend (from previous $0.21/share) to shareholders of record on March 14, 2018.
In all, income tax gains added $0.04 to the bottom line…a fact that becomes interesting when, excluding that benefit, one finds that TXRH would have put up a Q4 earnings miss. So, while some investors are impressed with the comp sales growth in the face of rising labor and food costs, others are scrutinizing the integrity of the Q4 “beat”. With that being said, shares of TXRH boasted gains of about 7% into the print in 2018 and better than 10% in the past three months…so likely, TXRH’s modest dip today may also be a product of some profit taking.