Q1 2021 Texas Roadhouse Inc Earnings Call
Ladies and gentlemen, thank you for spending by today's conference is scheduled to begin momentarily until that time your lines will remain on music hold thank you for your patience.
[music].
Ladies and gentlemen, thank you for standing by and welcome to the Texas Roadhouse, Inc. First quarter 2021 earnings Conference call. At this time, all participants are in a listen only mode.
The the speaker's presentation, there will be a question and answer session to ask a question. During the session you will need the press star one on your telephone keypads. Please be advised that today's conference is being recorded if you require any assistance. Please press star zero for the operator. Thank you. It is now my pleasure.
Let's turn the call over to MS. Tonya Robinson at MS. Robinson, the floor is yours.
Thank you Sylvia and good evening, everyone by now you should have access to our earnings release for the first quarter ended March 30th 2021, and it may also be found on our website at Texas Roadhouse Dot com in the investors section.
Before we begin our formal remarks I need to remind everyone. The part of our discussion today will include forward looking statements. These statements are not guarantees of future performance and therefore undue reliance should not be placed upon them. We refer all of you to our earnings release and our recent filings with the SEC the.
These documents provide a more detailed discussion of the relevant factors that could cause actual results to differ materially from those forward looking statements, including factors weighted to the COVID-19 pandemic. In addition, we may refer to non-GAAP measures if applicable reconciliations of the non-GAAP measures to the GAAP information can be.
Found in our earnings release on the call with me today is Gerry Morgan Chief Executive Officer of Texas Roadhouse. Following our remarks, we will open the call for questions now I'd like to turn the call over to Jerry.
Thanks, Tania and thank you to everyone for joining us emotionally the last six weeks have been extremely difficult for us while the business environment and our financial performance have continued to strengthen we have been mourning the passing of Kent Taylor our founder.
The CEO and friend.
It was a sudden and unexpected loss, but in typical can't fashion. He left us with a company built for success and a clear path forward, Kent will be deeply missed but his legacy and his vision will remain firmly ingrained in our culture and how we will run the business.
Going forward <unk>.
'twenty, one has started off well for us with significant sales acceleration and profitability improvement throughout the first quarter driven by the easing of dining room capacity restrictions guests continue to return to our dining rooms and at the same time to go sales volumes remains.
Steady for the quarter end, our sales momentum has continued into the first four weeks of the second quarter.
The challenges continue to exist in this environment, the biggest being staffing as the economy reopens and expands as always we remain committed to providing high levels of service at all of our concepts.
Our operators are working every day to recruit hire train additional staff for their restaurants, it's never been more difficult to attract and retain employees.
As a result, we are also seeing wage rate increases in our in order to remain competitive.
Help offset some of these pressures we implemented a $1 75 per cent menu price increase which went into effect yesterday.
Consistent with our normal practice, we had calls with operators to get insight into what they were experiencing and use that feedback to get to what we believe is the right amount of pricing for the business on the development front, our 2021 plan is progressing.
Thing as expected we opened three restaurants in the first quarter and have opened an additional five restaurants, so far in our second quarter.
And we continue to expect to open 25 to 30 company restaurants, this year, including as many as five Bubbas 33, restaurants, and one jaggers.
We are very excited about the direction of both of our newest concepts at Bubba as many of our restaurants are generating sales and profitability above pre COVID-19 levels and appear poised for continued growth and improvement on.
Our newest jaggers location continues to perform very well and we'll be opening our fourth location in the back half of this year. We believe in the opportunity that jaggers provides and we continued to focus on how it will fit into our portfolio and what our future.
Growth would look like.
We also continue to expand our retail business, our Margarita mixture of became available in some locations in February and our canned Margarita Seltzer, just rolled out to a limited number of retail stores.
These initiatives along with our Butcher shop business provide a solid foundation for us to build upon.
We will see how consumers respond to these offerings, but our current expectation is that it will take some time for these businesses to gain awareness and build momentum.
I want to end my remarks, with the message to the Texas Roadhouse family.
To the over 600, managing partners, who come to work every day ready to deliver on the promise of legendary food and legendary service and to the tens of thousands of Roadies in our kitchens in our dining rooms, and in our support center, who understand what it means to take.
Care of each other and our guest thank you for everything that you are doing for Texas Roadhouse. My commitment to you is that we will remain roadhouse strong for you for our guests and for Kent, Our restaurants will remain the friendliest place in town, we will continue to deliver service.
With Hart, our food will be recipe right Smokin Hot and picture perfect that is what can't expect it and that is what we will continue to deliver now Tonya will provide a financial update.
Thanks, Gary for the first quarter of 2021 we experienced strong sales growth versus both 2020 and 'twenty 19 comparable restaurant sales for the first quarter increased 18, 5% over the prior year comprised of 13% traffic growth and at 5.5% increase.
And average check at dining rooms reopened in capacity restrictions eased we saw trends improved with average weekly sales coming in just over 114000 for the quarter.
By month comparable sales versus 2020 decreased 0.3 per site decreased three 5% and increased $64 one per cent for our January February and March periods, respectively.
Sales volumes also contributed to our solid top line performance during the quarter, our restaurants average over 25000 per week in to go which accounted for 22, 3% of total sales.
As Jerry mentioned top line momentum continued in the first four weeks of our second quarter with average weekly sales of over 124000 and comparable sales up 126, 7% versus 2020 end up 29% versus 2019, our to go sales trying to also can.
With to go over 23000 per week, representing 18, 7% of total sales at all restaurants.
And we continue to maintain elevated levels of to go sales, regardless of the restaurants level of dining for merit dining room capacity.
The restaurant margins for the quarter as a percentage of total sales improved to 18, 6% largely due to the sales recovery.
Traffic growth along with a higher overall guest check driven by one 4% menu pricing and for 0.1% positive mix outpaced both inflation and growth in labor hours for.
And beverage cost as a percentage of total sales improved by 82 basis points to 31 six per cent for the quarter with commodity inflation of one 8%, we updated our full year inflation expectation to approximately 4% due the uncertainty on supply and demand throughout the remainder of 2021.
The kids, particularly on proteins and oils.
Labor is the percentage of total sales decreased 476 basis points. The 32, 5%. Despite labor dollars per store week, increasing two eight per cent compared to the prior year period Wayne.
Wage and the other inflation of five 5% and at two 3% increase in hours were partially offset by a five per cent benefit from one time items included in these one time items is the impact of overlapping $10 7 million of labor cost from the first quarter of 2020 related to.
Already the relief pay and additional benefits to our frontline employees compared to zero point $6 million of similar costs in the current quarter.
Additionally, we are overlapping $2 3 million of costs in the prior year period unrelated to COVID-19 for the adjustment of reserves on our group Health insurance program.
As we move forward the remains of need to continue to bolster our staffing levels given the pace of sales recovery, we have experienced over the last several months, which we expect to result in higher labor costs.
Other operating costs were 58 basis points lower than the prior year period, primarily driven by sales leverage and overlapping of $1.3 million charge from the first quarter of 2020 related to our quarterly actuarial reserve adjustment for general liability insurance.
These benefits more than offset the higher costs associated with PPE to go supplies and other COVID-19 related items.
Moving below restaurant margin G&A costs for the quarter increased $3 8 million versus the prior year period of decreased by 46 basis points as a percentage of revenue to four 6%.
The increase in G&A dollars was primarily driven by the additional $5 2 million of cash and equity compensation, partially offset by a two point for a million dollar reduction in travel and meeting expense.
With regard to cash flow. We ended the first quarter with 496 million of cash which is at $132 million from the end of the fourth quarter.
The increase was driven by 178 million of cash flow from operations with most of the offset coming from 39 million of capital expenditures.
We are pleased to announce at our board of directors has authorized at the reinstatement of a quarterly dividend the upcoming dividend, which will be paid in June has been set at 40 cents per share, which compares to the 36 cents per share that was last paid in March of 2020 before the dividend was paused.
While we are comfortable with our capital position and expect to continue to generate healthy cash flow from operations, our cash balance will be impacted by the reinstatement of a quarterly dividend the upcoming repayment of 15 million borrowed last may at under the accordion feature of our credit facility and the approximately 24 million of deferred.
Like of tax liability payment due at the end of the year.
I will end of today with the special Thank you to everyone for the kind words condolences and memory is that you have shared with us over the last month.
I mean, so much to me and all of US here at Texas Roadhouse.
The we have felt since ken's passing its difficult to put into words, but I know how much he believed and all of us and in this company, we will continue to rock on for Cat.
Operator, please open the lines for questions.
Ladies and gentlemen, if you would like to ask a question. Please press star one on your telephone Keypads again to ask a question. Please press star one on your telephone Keypads, we'll pause for just a moment to compile the Q&A roster.
Okay.
Your first question comes from the line of Brian Bittner from Oppenheimer <unk> company.
Thank you. Thanks for the question first and foremost just my condolences to the at Texas Roadhouse team on the loss of Kent as well as his family.
All of it and our thoughts and prayers and US analysts are obviously going to miss his refreshing and sincere candor on these calls that's for that's for sure.
As it relates to sales.
You're you're doing you know, 21% higher sales per unit right now than at 19, and I know a big piece of this tonya's the off premise business, but but the math. We just did says that you're still doing more sales per unit on premise today than you were doing in 2019.
With limited seating capacity and you know the the thought before the pandemic on on Texas Roadhouse Day, you guys were always really busy restaurant you need to find creative ways to gross sales be a bump outs of shoulder period gross so.
You know how youre, putting up these numbers with less capacity is mindboggling to us. So can you maybe walk us through the building blocks of how are you doing this as it is at much big.
Bigger check growth per customer are you just getting a huge on lock at the shoulder periods. Just anything you can do to provide us some help on on these numbers.
Sure Brian and thank you for those comments on yeah. When you look at April and at 29% on a big piece of that traffic, obviously is coming from that higher to go volume that we're experiencing versus you know what we're aware of we were in 2019 a lot of that is you know demand on the weekdays.
You've seen that increase the crops all hours on those day parts of that a piece of whats helping at capacity restrictions of obviously, reducing throughout the quarter. You know we entered the April with no stores you know on on it to go only schedule of everyone had some type of dining room capacity.
So that certainly did help and and you know we definitely are seeing some benefit on those shoulder is exactly what you're mentioning. So we've got you know at probably 200 or so restaurants that have opened earlier, they're opening at three o'clock versus four o'clock on you're seeing folks coming in earlier.
Obviously, then in the power hours when you have those wait times, you know that makes it easier to you know to get more people in the building as you have people coming in earlier, maybe to avoid crowds things like that so I think that definitely has helped us from a capacity perspective, and then your comment on the average CAC is at is exactly right I mean that average check check of.
It's up you do have some pricing net pricing on a two year stack. The you know as is runs at probably around three and a half the 4%, but that there is still a really good amount of positive mix that we see happening in the menu I mean, we've been seeing that you know for a little while you're seeing gas trading up to higher.
Price steak and items entrees on the menu bigger stakes you'd see that alcohol on you know mix coming back into play at the dining rooms reopen all of those things really playing into what's driving you know a lot of that that sales momentum that we saw in margin and on April.
Your next question out of it comes from.
Oh, I'm, sorry, somebody I, just thought maybe I missed the piece of the question so apologize.
Your next question comes from the line of Jake Bartlett from true of Securities.
Great. Thanks for taking the question that you know I'd also like the share my my condolences as really heartbreaking to hear and so my thoughts are with you as well.
I had a question about restaurant level margins and Tania you shared on last quarter and an expectation for 2021 of the for about 15% to 16% restaurant level margins.
With sales from I think higher than we.
Back to you probably you expected on how much does that change maybe also just the light at the higher commodity inflation and labor pressures that you're seeing and then also if you're from.
If you could comment on your long term view on on margins I know, it's tough to estimate what the off premise where it settles out but you can have a more encourage you know are you more encouraged about your ability to maybe be above the kind of your long term target.
Yeah. Thanks, Jake I mean at given the results. We saw in Q1, obviously, that's a great start to the year right in that that certainly helps from a margin outlook perspective, you know I'll remind you that of Q1 tends to be at a higher margin percentage than the rest of the here and so that could still you know that could be true for.
For 2021.
And I think of couple of things I'd point out is the one thing is the sales recovery we saw in March.
So probably the pace of staffing and labor did not keep up with that so we would expect Canadian for it will have some additional labor cost as we are staffing and Jerry mentioned, the staffing initiatives and those things that we're doing with what you know kind of caught me at I think we'll have some additional labor costs. That's what we want to see is that investment happening. So that's all.
Our expectation, but when you think about at from a lot you know just over the course of the year. We've always said you know the margin on the margin outlook, which depends on the mix of sales and if those to go sales held at a dining room sales, we're ramping up at.
That kind of help those lower margin to go sales to be more neutral on as far as their impact on margin. So that's beneficial to margin.
That is where you could see at being on the higher end, you know kind of of that 15% to 17% range of course of lots going to depend on inflation commodity inflation, you're just we're seeing those cost increase and a lot will depend on the mix of the sales and consumer behavior and just all of those things so still.
Really too early to speak you know to speak with a lot of certainty on it other than we're pleased with how the quarter started and you know we're working on we're working on staffing and labor.
Yeah, and I would just add that obviously, we saw January and February is almost normal to some degree and then at March we got a little more capacity in at.
And some really outstanding results by our operators from a sales and profit standpoint, and the execution. So very proud of what they did for March and April end, and it's exciting for the future, but it is unknown on the labor side as we staff up and get caught up on the people side and then obviously.
As we hear a lot about pricing of new product and in.
That side of it is definitely something we are paying close attention to.
Great.
A follow up to Brian's question earlier on my math as a whole for the first quarter's net new in store dining was down about 12% year over year from the first quarter of 19.
Can you share any of you showed in the past on I'm not sure if you've done the math at this quarter, but at what what was your average capacity.
And in the stores and the factoring in social distancing I'm imagining it was.
You know that you are kind of out punching net capacity.
Yeah. If you look at the dining room I mean at it it can be top of especially you know in those months, where there was a lot of change that happened in pretty quickly as far as restrictions changing and things like that you know when you get into months like March and April were you were you know all restaurants had some type of dining room capacity I would imagine you know at its tough to calculate but I would.
Imagine we were probably in the 75 to 80 per cent range from the capacity perspective, and some of the things I think that help at him and we're following all state and local guidelines as.
As far as capacity and things like that but having the booths, having the partitions definitely you know help us from that standpoint, I'm opening a little earlier definitely helps you know you've got operators starting to book a little more of that outdoor on dining opportunity with weather getting a little more warm.
So you know those all of those things kind of play play into that for sure, but if I had to guess I would say, it's probably in at 75 to 80 per cent range.
Great. Thanks, a lot I appreciate it.
Thank you.
Your next question comes from Dennis Geiger from UBS.
Thank you and then of course, the condolences, our thoughts and prayers with Qantas family and at the Roadhouse family.
I'm wondering if you could talk a bit more about the off premise business thoughts on the on the trends there and the strong since the.
The ability that you've seen you gave some commentary already but just curious of your anything more of that's kind of based on what you've seen over these last few months sheet, where do you think retention and ultimately those those off premise dollars CDR.
Could end up going and if there's anything that you could call out that you're seeing on the technology or the other initiatives that you've been pushing at least as you've leaned in on the on the channel.
The B curious there or if there's anything on geography.
As it relates to off premise that's been interesting be curious as it relates to how you think about the go forward. Thank you.
Sure. Thanks, Dennis Yeah, I can give you just some of the numbers perspective and share you'll probably want to speak to more of some of the initiatives that we're working on and things like that related to to go but you know from of numbers perspective, those numbers, obviously, you're staying up there you know we're seeing the percentage come down but the per week sales number is sticking in that 'twenty four 'twenty five.
The range, which is definitely good to see and like we mentioned last quarter. When we talked you know if you look at the stores that had over $70 75 per cent or more capacity in the dining room those numbers arent much different for them, so they're holding onto it they're finding ways to do at and one one other.
[noise] perspective, I'll give you as well you know we have we've had a big focus on digital and we're seeing the digital compared to call an increase them a bit. So at it ran about 50% I think last quarter. It was up you know closer to you know 55. This quarter. So you are seeing a bit more of buy in on that.
Of that digital which could be you know helping from that perspective too.
And I would just say from an operations standpoint, we will continue to continuing to do some curbside, but our our convenient pick up windows that we've really put in across the concept of really then of hit with our guests and so we're excited about that the ability to text and communicate with our guests.
The for them to stay on their car and then come get their food has been a big win our App upgrade has continued to show excitement and user friendly.
The facility kind of deal in and we've tested a couple of drive up windows not drive through but of drive up window, where people can Texas stay on their car and then come pick up their food from that and that's having also some success. So we're really excited about holding those numbers and our operators really for.
And out of the to go side and make it at a great experience when when the when those folks land at home and they open up that food around their dining room table with their families.
Thank you.
Your next question comes from the line of Peter.
Oh from B T I D.
Yes.
Great. Thanks, and on my condolences as well to the at Texas Roadhouse team and the Cannes family.
Tania or Gerry just looks like from the numbers that you're putting up which are really impressive in the quarter end. The month of April that you're getting some significant share I'm trying to understand if you guys things of this is more temporary or permanent.
I guess as you look across the country and many of the markets, where you're like you're picking up share or are you seeing.
At any evidence the some of your competitors are still closed or at a slower to ramp back up because of the labor environment or do you feel like you know the overall environment is pretty healthy right now and these games are more permanent in nature.
We're sure hope so we're going to execute and we're going to try to earn that business from our guests that will tell you that yeah I would assume if you read things theres a lot of restaurants that haven't reopened alike.
And some are really really fighting that staffing battle I think we are winning that.
We are making some good money working on our shifts and it's busy end and they're excited about it. So maybe that's a part of the reason why we're maybe winning the staffing battle, a little more than others, but.
We're going to continue to deliver on our promise of legendary food and luxury service and create a great environment for our employees to work in and we're going to continue to get staff, assuming that those sales are going to stay there and we're going to earn them.
Yeah.
Great very helpful. And then just on the I'm coming back to margin.
Tony I know you talked about 4% commodity inflation I think that's up from maybe previous outlook of about 3%, but there was only about 1.8 per cent in the first quarter. So can you walk us through the cadence of inflation for the balance of the year of how you guys see at this point. Thanks.
Yeah sure thing Peter on Yeah.
Yeah, obviously, you know we raised that guidance from three to four and with at 1.8 result in Q1 implies that we will see higher kind of see higher than you know that 4% most likely throughout the rest of the year on right now it feels like our assumption of it it's going to be pretty evenly spaced across the year and their staff.
The only pressures now I think Q2, we expect to see you know those those higher levels of inflation, there could be some opportunity for that to moderate in the back half of the year, just depending on you know different things happening.
E suppliers continue to struggle on and be challenged by labor you continue to see whether end whether weather impacts from Q1 impacting some of the supply and just overall demand being as high as it is across the industry is creating some pressure so right now of our expectation on the.
On 4% on a full year would be pretty evenly spread over the next three quarters.
Thank you.
Mhm.
Your next question comes from John Glass from Morgan Stanley.
It's hard to imagine what you're ball gone through one of them I'm. So sorry for that and then we all.
We all Miss Kevin this end as well.
Can you maybe just coming back to the capacity question that was raised earlier, maybe it would be helpful. Just what what is one of the volumes you are your top quartile of quintile restaurants are doing now so you get a sense of what what is possible with these.
Kind of trends sustain or grow and how big of a role does like outdoor seating play and it was really in the spring, but has that been a way that you've been able to serve more of this volume that you did you haven't historically experienced.
Sure. John This is out of kind of start things off I'll tell you you know we have stores today in March and April that we're able to you know.
Sure of eight to 10000 gaps of weak I mean, they're generating some significant sales now the level of sales for them kind of depends on where they're located what kind of menu pricing. They have different things like that we kind of focus a little bit more on that guest count end because that really affects how they execute within the building and so you see those stores doing well.
They are probably those stores, probably gonna be there's definitely going to be in states that are 75% or more of them, they're probably closer to 100 I'm. There to go sales are staying high.
And they're finding ways to do that theyre getting benefit definitely on average check them to with pricing in and just that positive mix, we talked about earlier on but we see store is able to do that in a in a normal prototype.
So that gives us confidence the you know we think adds dining room restrictions are lifted we can continue to see that happen across the company and I think just the model that we have at best sharing best practices everybody working together.
<unk> sat too because they're definitely talking to each other end and folks are seeing the results at other places to drive their motivation to do the same thing so we.
We do feel confident about that opportunity a lot will depend on that to go sticking at.
And a lot will depend on you know continued consumer behavior on how that consumers feeling I'm you know throughout the course of the year end on how much do you know discretionary funds. They have to spend so you know we don't take it for granted that's for sure.
But we feel good about the opportunity, yes, John and I would just say that we're very pleased with how we're holding the to go sales on our high volume stores that are 75, and 100% capacity. The exciting part for US is all of the stores that have gone from zero to 25 to 50 in the ups.
Side for them and what we learned how to ramp up our staffing from the the group that went six months ago with the more open capacity so with them sharing that information, we're now able to get staffed up a little quicker on some of these ones that go from zero to 50 or from 25% to 75 and we have.
The strategy and a plan to be able to be properly staffed to execute when we jumped capacities like that in the so the future is exciting from that aspect and we have a good plan of of being able to share with each other how to get there quickly to be able to execute for the volume.
Okay. Thanks for that and maybe just a quick follow up on labor and scarcity for first I mean is there an actual issue, where maybe not being able to get the staffing that you need if there is at that there was at more just a wage rate issue and how does how do you think about wage rates in the second quarter that fire of private episodic inside of does that kind of the current run rate or do you see that.
Has that been like accelerating sequentially. So could could in fact turned out to the worse as we get through the second quarter.
You know the wage rate the tough to say I think you know if you're looking at at you know I think it continues to hold a bit will you will be kind of lapping. The bump we took one of them on them. When we were to go on Lee and we were doing you know minimum wage for the tipped employees. So we.
Took a bit of of hit there in 2020 at so we'll be lapping that kind of starting at that kind of started in April.
So you get maybe at a little of benefit there for just like in the year over year, but I would expect at those wage pressures continue.
And you.
You know I think when you saw the stores on the scarcity thing I think initially as the sales started ramping up fast you. You did have were it was tough to find people. Because you were trying to do at really quickly I think they've gotten much much better at that we've provided so many resources and really worked with on to make sure that we're taking care of that and getting them there but.
It's both at our staffing finding folks in of wage rate issue, depending on what part of the country, you're in and I would just say John as Doug Thompson. Our CEO of just finished 65 calls with our multi unit partners.
And there's definitely a large group that are fully staffed.
There's a big group that are close to it and then there is a group that deeds of lot of help and support to get there and I would tell you that everybody in this company we call at Ninja staffing, but we are all in to support and help our operators get the people that they need so that we can have the hospital.
<unk> that we like to present and deliver.
Thanks for that.
Thanks, John.
Your next question comes from David Palmer from Evercore ISI.
Thanks, and my condolences on the Kantar as well and also congratulations on on this business update.
In addition to that.
Some of some restaurants.
Lately you have identified productivity during the stress of this pandemic and theyre coming out of this thinking that they might reach new highs and margins at sales come back.
But they might have found some new tricks of the trade under the duress of of this.
Sales dip, where there any learnings through the crisis. The have you thinking about newer highs for profitability than you had thought previously you know maybe upside of that old 17% to 18% range and I have a follow on.
Yeah sure Dan at you know I think probably the bigger outside of just what that mixes of dining room sales in to go sales and where that next day as you know on that chat because that obviously is very beneficial to the bottom line.
So those are two things I'd, probably say you know that a lot depends on that I think you know there's no doubt we've learned a lot the last year and a half on run at you know running these restaurants during the crisis and at these levels of to go on all of that the one thing that we continue to take away, though is not to make changes that you know put lots.
The degree of food legendary service at risk I mean, it's really easy to want to do that you know to cut something to get that profitability, but we look at it is that long term investment we've talked about at a lot over the years, we're going to stay true to that.
We've done that in the past when we've been in a crisis situation like you know on 2007 with the economy end and we just know that works so from our perspective at.
Stay true to those things and in a lot of that is because of the compensation program. We have in place I mean, the way we pay our operators based on the bottom line as you all well know.
Motivates them already to run efficiently to make the right decisions to control costs and do what they need to do to drive topline sales. So you know there's no change there for sure and that I think keeps us in a good spot yes.
David and I would just add the we did learn a lot.
And the one thing we learned was that the entrepreneurial spirit in this company is strong and we learned out of lot from Kent. He gave us the freedom to be owners and operators and partners. He listened. He asked we collaborate we talk to each other we.
We help each other to find solutions and it is the strength in our company that we believe in that that if somebody is having a win and they share their not so it's.
It's exciting to know that we are very thrilled at the number one about our results in March end, and obviously April as we go through and even January February but the quarter itself.
It was impressive what our operators will continue to surprise I say surprised at I don't know that I'm surprised at just I'm. So happy for what they do and it's easy for me to sit here and.
And brag about what champions. These people are that are out there in these restaurants delivering on our promise of food and service.
And just a quick follow up on that is.
Do you.
Is there any way for you to give us a sense of how much of a margin help it has been having the type of check gains that you are having the the fact that people were perhaps in that mood of having that the.
The the extra a beverage or whatever that they might or might not have been having before and then and then how much of a margin dilution at is the fact that 25000 per per week is happening from takeout.
The margin descriptions of those two things.
Yeah sure David on.
So when you look at the to go it's really hard on of margin to talk about it from a margin perspective, because he got to you know determine what of your allocating into that to go bucket versus into the dining room. So you can say, hey, theres the opportunity perhaps for some labor savings on the to go side you have higher cost of supply there's a lot of different puts and takes.
So you know we know the bigger issue really on the to go margin. It's the for dollar difference on PPA, that's really the bigger driver and so we've been working to get that to kind of close that gap, Inc of different creative ways to do that we've seen you know that GAAP close a little bit so that's been call on.
I think you know well just continue to focus on.
You know on on anything we can do from that sales perspective to hold onto the two those to go sales from a margin perspective. So you know that that's really that's really going to be the probably the bigger push there on that the.
I'm, sorry, I just didn't want to give you some thoughts on the eight 6% comp.
Comp number that we had for 'twenty one versus 19, there was about 2% mix in that positive mix.
So as you all know we've got number of Rins of you usually for us a little more neutral on a little flat maybe slightly negative.
So that's a pretty big number two 1% on sales volume that we have pricing was about four 9%. So of 7% increase on an average check in that $8 six per cent number just to give you some insight into of what that mix impact looks like.
Thank you.
Hmm.
Your next question comes from Jeffrey Bernstein from Barclays.
Great. Thank you very much in the.
My sincere condolences to the Texas Roadhouse family as well.
Kent spontaneous commentary on these calls will forever be missed so Jerry.
From catchy phrases to keep us engaged.
Two questions one just on the the inflation side. Besides the efficiencies that we've talked about that you've perhaps learn for the pandemic.
I'm just wondering whether you think the 175% price increase I think you said you took yesterday is enough to last you through year end.
Tom You just mentioned maybe you are now running at close to 5% so.
It could actually be enough, but I'm, just wondering with Cogs inflation being raised and labor inflation on the way up how you think about the next window of opportunity to raise prices further or whether you go through a period of time like you have the number of years ago, where you.
We're not focused on the near term margin you're focused on regaining of the traffic and then at one follow up.
Yeah sure at that 5% pricing I mentioned was on what the two year number. So it was 19 at 21, so that was two years worth of pricing.
It's only one 4% of pricing that's in Q1, just 'twenty one versus 'twenty. So that's made up of them.
There was at 1% that we took in November of 2020.
And then we had about 35 basis points on the liquor and Sop at that we took in August. So that's kind of how you built that at 1.4%, but on you know right now we feel like at 175 is where we need to be at as Jerry mentioned and that was based on feedback from operators and how they were feeling in the wage pressures in states that have higher wage pressure, we took more price.
Thing in those stores you know the where they were seeing those mandated.
Going up stores that didn't have that perhaps you're maybe we took a little less so we feel good about that number right now, we'll probably we'll have the conversation in Q3 again as we typically do at.
And we will talk to the operators kind of at you know take the temperature of all the different thing to look at when you think about pricing and we'll see them.
It would probably be something we would implement in November December that's typically the way we look at it.
Got you so through November of this year, you're probably running now at just north of 3% pricing.
That's right Yeah, you've had some roll off yeah.
Yeah, you had on Q Q2, it looks like about 2.6 because.
We started at basically the first day of our <unk> are may period.
And then you ramp up to that almost three in Q3.
Got you and I'm just the follow up Jeremy I'm, just wondering your thoughts on leadership more broadly whether you think there's room or opportunity to make hires in the C suite or at the senior level.
We know that the.
Can did more than most of that obviously expect the view of anyone else from.
After all he brought you went to help him so I'm wondering whether.
I would think you would need somebody to do the same to fill the shoes, you were going to be taking especially because kind of being the founder in the visionary just trying to think about how you think about leadership going forward, whether there's any change to be perhaps expected. Thanks.
Come on man, what kind of question is that.
Hey, I heard your first comment that I need to be funny or more entertaining. So I don't know that I can.
Do any of that as good as Kent did but we will have some fun at some point, but I will tell you that my philosophy is in my conversations with Kent when he promoted me to president and about building a strong leadership team and we have a very clear vision as to.
Get what we call bigger faster and stronger end at every level of whether it be in the restaurant management, whether it be the multiunit supervision here at the support center, we will definitely look at the workload that it's needed the the visions that are needed and add people the right people when needed.
To add value to our team we will continue to get stronger it's the it's a big job no doubt about it is the big shoes to fill.
I think he would tell me to be myself and the continued to do the things that I've done that have been pretty good which is really building teams and structuring and in communications. So.
All of Texas Roadhouse have been of part of it for 24 years.
Now that you've got me talking a little bit all of you know.
It's an exciting it's an exciting future, especially after what we've seen happen in March we are so grateful to all of our guest who kind of I believe kind of came in to pay their respects to Kent and everything that he's done and meant to Texas Roadhouse. So maybe there was some of that in our sales spike in March but I think he was so well.
Known and respected and loved by all of US and we know the recipe to succeed he taught us that he has paid paved the way for us and we will continue to follow that recipe and we will execute to the best of our ability.
Great. Thank you.
Youre welcome. Thank you Jeff.
Your next question comes from David <unk> from Baird.
Hi, Thank you, it's David Tarantino on my condolences to the the <unk>.
Texas Roadhouse team and family as well.
Thanks, David.
I wanted to ask the Tanya if there's the easy way to frame up.
On the labor line.
If you look at all of the moving parts I mean, the the glass.
Couple of years of it so ball at all I was wondering if you could maybe talk about in terms of dollars per week or how you would encourage us to think about modeling that line given all of the pieces.
Yeah sure David It at the top one no doubt about it, especially with the volatility in 2020. So one way you can look at it is really the pace at our 2019.
I'm kind of starting with that labor dollars per store week, you know and growing those that as a percentage of you know growing that percentage of sales easing of inflation over a two year period. You know I think we ran around 555, something like that five five in 2019.
That could be pretty similar in 'twenty one.
Or yes for.
For this year, so kind of taking that two year stack, there and and combining that I'm, saying, hey could inflation on a two year basis be closer to 10, maybe a little over that I think when you look at the hours component of it is possible that we could be at a similar hours to 2019.
On because they think you know we're going to continue to see dining room of restrictions lifted over the course of the year.
So you know it's going to take time to kind of get back you know as we get back to those levels and end sales continue to grow. So that's kind of the way we look at it as saying hey, it could be possible that ours are kind of neutral.
For 2019, we see you know of two year stack on inflation be around that 10 per cent or so.
That could be one way to look at it it is a difficult number to forecast. This year just given the volatility last year end and some of the volatility we continue to see as we're figuring out what those hours need to look like.
Got it.
I guess, you know what traffic likely being up versus 2019, but why would you have the hours at the same as or something.
The efficiencies that you have a day.
Arrive coming out of the pandemic or I guess why would the hours not be higher.
Well theres a possibility they could be so you know I think a lot depends on the continued pace of sales and how they grow and end the staffing that we've talked about it getting back to fully staff like we were in 2019. So I think that's the piece of it there could be some efficiencies on the to go side.
And if that continues to be a little bit of higher piece.
Piece of the sales number you could see a little of other efficiency. There because you don't have that you know quite as much labor, perhaps on that to go side, so that that might be where you know you can see some opportunity to pick it up.
Great.
Thank you very much.
Youre welcome.
Your next question comes from Brett Levy from M. K M partners.
Great. Thanks for taking the time for the call again like everyone else condolences and best wishes to everyone.
Really tough times for you all but.
The job Jerry I guess I'll start with a question for you and it might be a little bit early.
To talk about the landscape, but given what youre hearing from the field what are you seeing and hearing about closures and <unk>.
Does that give you any change in your thoughts of that with the long term unit potential looks like for given what we've seen from guest behavior, how youre thinking about box design end utilization and then I have a separate question.
Well I think we're going to stay with our plan and execute our 25 to 30, depending on the Roadhouse is our mother ship and you know, but we are very excited about bubbles growth through the pandemic and where we're at from a partnership and leadership plan.
So and then jaggers has is very exciting to us and we're having some real success with the our new unit over there and we've got a couple of plans in moving forward on that.
I believe that Doug is going to continue to focus heavily on on the roadhouse and bubbles and he's going to partner up and helped me end, but I will take the lead on jaggers, just like kind of had that in and we will get that thing up and running operationally and grow but we're going to probably stay the boxes.
Pretty well design, we have a couple of <unk>.
Processes or prototypes I guess, you would say that we're looking at to help with our to go execution. We're trying a few things the.
We're very happy with the pickup Windows and we're you know we're excited to see what this drive up window does for us if it really makes it convenient for the guest in and we can really get into that game than maybe we go back and look at some stores that we might be able to retro in and see if that works. So we feel like our building.
The us some some ability to adapt and change if needed to be able to execute better but.
We feel really good about the design of our front of the house and back of the house interior and it really does we are able to execute at very well from the kitchen layout of getting the food out of the kitchen and getting it delivered to our guests and of great presentation.
Yeah, Brett and I'll mention to you too I mean, there's there's more to development and just finding the sites its finding the people in those management teams are so important so that's harder to ramp up quickly.
For them, you know and that's something we're always going to be really careful of you know you don't want to just hoping those restaurants, because you've got a piece of land of do went on you want to make sure you've got the team and people are ready to go. So that's something we're always thinking about too when it comes to development.
Fair enough and then this can be for either of you.
And just taking a David's earlier question in another direction, just all of the things that you've learned.
Instead of just focused on the margin structurally and strategically there are a lot of things that you used to do.
Now that you didn't ever really envision doing whether that's to go or retail.
<unk>.
What else.
Are you looking at that you've learned at maybe is worth considering whether thats. Your stations per server just the level of expansion of tech lunch now that you've gone into earlier windows and I'll stop there.
Yeah, I would say you know the thing that that we probably would would find most intriguing is how to pay at the table and if we can get that deal done that I think that really does enhance the speed of the experience in at.
And so maybe there is that the app has been huge for us we've really upgraded the tremendously and it seems to be very user friendly and being utilized in a much more efficient way the.
<unk> to text with the guest and communicate with them like that has really been a big win for us in and of lot of ways and then.
From from that speed side of I don't know that we'll ever get away from our philosophy of legendary service being anything more than three tables and.
Know that we will have a kiosk or Z Oscar whatever too.
Replace a smiling face engaged in your level of service. So, but we are we need the to work on our pay at the table plan and get more people to utilize that in and see what technology will help us in that of particular part of the experience.
Very helpful. Thank you.
Thanks, Brett.
Your next question comes from the line of Jared Garber from Goldman Sachs.
The question and of course, my condolences as well.
Follow up kind of on the last question as it relates to the technology infrastructure that you guys are building, we've seen the app downloads really accelerate along with those those updates that you may be kind of at the back half or at the back part of last year at into this year and wanted to get a sense of how you're using maybe at the data through that App and what you're learning about the customer.
And with that customer that's using the app on whether there may be different from the customer that you traditionally see in at Texas Roadhouse.
If its current users adopting that technology.
Yeah, Hey, Terry Thanks for the question on so we're really just dipping our toe in the water on with the data we haven't really gotten into really doing that it's very early at so that's something that we definitely see some opportunity to take that data and you know utilize at you just always have issues with the.
<unk> and things like that but on.
It's just really early yet on them you know doing.
Doing that hopefully we'll have more for you all on that next call.
Sure.
Okay.
Oh.
Your next question comes from the line of Crusoe Cool from Stifel.
Thank you for taking my question on welcome Jerry to the new role I look forward. The following your progress.
Just on your U.
You mentioned lapping quite of bit of COVID-19 specific expenses in the quarter and I was hoping you could maybe give us a sense of how that progresses through the rest of the year issue at.
Pandemic pay and some of the other items.
Yeah sure kind of hold on I'm looking to see if I have that handy I wanted to say Q2 was proud of our I'm sorry, the <unk>.
We called out in Q1, where some of the biggest numbers on.
That I think that we had.
If you end up.
Might have to get back with you on what those numbers were how they played out for the rest of 2020 I. It looks like we had about $4 7 million unemployed benefits for Q2 of 20.
And then in Q3.
We had about a $4 $5 million tax credit related to the stimulus payments that we did in Q1. So that's where we had we went back at picked up that tax benefit.
And then maybe another.
5 million of cost, so that offset that for $5 million.
And then in Q4.
But we had about another half a million of net cost. So that was that you know what is the cost we picked up on net of tax credits.
Hopefully that gives you gives you an idea I know we spend does that on the relief. So if you need more detail that might be the place to check check those numbers out but that should be the bigger pieces of it.
Okay. No. That's helpful and then I apologize if I missed it but can you provide a range for G&A for the year I'm, assuming incentive comp could be meaningfully higher you know given the current trend. So hoping maybe you could help us.
Ballpark that.
Sure Yeah, I think probably with just as you mentioned with at higher you know on equity compensation cost and I'm, you know the results and things like that and how performance comp turns out that'll be a big piece of what you know how G&A growth, but I think the expectation right now.
That would be higher I'm, you know definitely higher than we were in 2020, probably getting back even over to 20 higher than 2019 levels. So we'll have conference get back into play in August.
September.
So you know travel we would expect would start ramping up there as you know, we're still making some estimates and assumptions on that right. Now we haven't really started turning that pass it back on yet, but assuming we will probably later on this year are beginning to maybe have some more in person meetings things like that would be built into that assumption that maybe we.
It would be a little bit higher than where we were in 2019.
That's helpful. Thank you.
Yes.
Your next question comes from the line of Lauren Silberman from Credit Suisse.
Thanks for my off the share my deepest simple can go on to.
Really impressive sales level of on premise fully returned to go at 20000 pretty consistently there are puts and takes going forward, but stimulates rolling off you think capacity restriction of the pent up demand at some of those other factors you mentioned on expanding hours in shoulder period.
Just as you think of the rest of the 2021 of your base case expectation that you can maintain these levels of on premise and to go sales volumes that you've seen over the past couple of months from here.
Yeah.
Hey, Laura it's Tony I mean that with the our expectation I mean, you know we would hope that we begin to see dining restrictions ease and in more places and at those dining room sales continue to grow.
And our hope would be that we continue to see opportunity on the shoulder period and we.
We seek to go to continue to be strong.
So that's what we're working towards that would be our goal is 50 of that happened I do agree, though I think youre right a lot of those things you mentioned stimulus you know payments and the health of the consumer and all of those things I think will definitely come into play probably later on in 'twenty, one, yes, and I would just say again as we continue to.
The people being a little leery of coming inside the dining room and all of that the the vaccinations. We believe are helping but I think there is still a large group of consumers that really don't want to come in the building. So I believe that we believe we will know more each quarter that theres still going to be.
The large demand for our to go business as long as we executed properly and.
And we feel good about that so we would definitely have got a good blend of the the ability to execute at so.
We feel comfortable that we're going to be able to we will do our part of hopefully the consumer will decide whether they want to go in their vehicle or they want to come on inside.
Yeah, Lorne and at one other thing I'd mention to you it'll be interesting to see if we get back to normal seasonality or not I mean, you know a lot of that depends on the vacations and kids going back to school and just some of how that plays out over the year. So we'll see we'll see how that kind of turns out for 'twenty one.
Great. That's really helpful and then just.
What's your sense of overlap between the on premise and to go customer of differences in use case do you think the primary driver is some of that still hesitancy, that's going on or more broadly speaking.
There's just that demand for to go.
I think theres still on some you know some areas definitely you still see folks who are a little more hesitant to come inside and Inc.
That continues across the country.
You're seeing that and that that certainly helps us from a to go perspective.
<unk> continues to help that I think you also maybe half of you added has seen the rotation one more time than maybe what they normally did because maybe they're okay eating in and they're okay getting to go. So it's probably you know we don't have a lot of hard data on that or any anything to point of view. That's just that's just would be my speculation.
Great. Thanks, so much.
Mhm.
Your next question comes from John <unk> from J P. Morgan.
Hi, Thank you Jerry your comments that you know that this was.
I think the most difficult staffing environment that you've seen in terms of attracting and retaining employees is just interesting at the end itself, but yes I mean.
I just wanted to get a little bit more insight in terms of what you see basically facing the industry in other words.
On the people you know that.
You know that you have in the restaurant or maybe that youre, losing are unable to obtain are they taking jobs other than restaurants are they taking jobs at other restaurants I mean is at.
Or are there still some lingering you know maybe COVID-19 concerns that yet I suppose certain of employees might have so in other words, what are the challenges of getting the people that you could've gotten two years ago.
And the a Texas roadhouse that makes the excuse me 21 different than the different the 19th of you know again. The these are kind of more industry questions, maybe maybe the at Texas Roadhouse, but certainly I would love to hear your perspective.
Well I can tell you in talking to our operators, we're getting a lot of applicants but.
But not everybody is really motivated to get a job and so we're seeing a lot of no shows we are able our turnover is lower than it's historically been so we are actually keeping our people really well with some real proud of our operators for that but their concern is that they're being very aggressive.
Of.
Recruiting and trying to let people know.
And we're setting up these interviews and people just are not showing up in the which is really unusual and maybe thats because of the payment that they have the money has come into them a little easy just my opinion, but.
That's where our concern is so the one once we get them and they get in they're making good money at our restaurants, where we're at keeping them very busy there is no doubt about that and they like that side of it. We just have a lot of no shows from the Appleton standpoint. So.
Where we're having to be a little more aggressive on the hiring and training and then obviously, we treat people and take great care of them.
Yeah, and I'd say at.
Certainly you're known for that which is why at which is why obviously I'm asking your opinion. Thank you for sharing that end.
Are the challenges are they in the waitstaff are the buffers dishwashers or why on Cook for me or are you seeing any particular functions that are seeing pressure.
Yes, I would say, it's a little bit of everything when we look at our numbers compared to 'twenty. One we're almost back to our up to 19 I would say, we're almost back there but where.
We're attacking at I would just say that in and I have said that whoever is going to win this year is going to win the battle of the people compared to what the challenges that we had to learn how to pivot in 2020 and adjust our business. This year I think of it is going to be the restaurant chains that can can get people end.
And supply the guests with a great experience as they start to come back more and more on.
We're excited about our sales and what the at our guests are pretty loyal and and they are absolutely excited to get back in the building.
And we've just got to continue to beef up the staffing in and be able to provide a great experience for them.
Thank you thanks for the color.
Thanks, John.
Yeah.
Your next question comes from Brian Vaccaro from Raymond James.
Yes.
So for the team as well certainly remaining on our thoughts and prayers.
But most of the might of been asked at the two quick ones. If I could I'm, telling you I know, it's a very dynamic environment, but on store margins and the cadence you saw through Q1 of I believe you were in the 15, 16% range last time, we spoke back in Jan tab, which seems to imply seeing store margins north of 20% as your sales volumes have moved higher moving through.
March I just wanted to confirm that's right and then secondly wanted to ask about the other Opex line I noticed that the ticked up sequentially. This quarter and were also above 19 levels could you just walk through some of the puts and takes in that line and were there any one timers to be aware of.
Yeah sure, Brian So youre absolutely right. When you think about the cadence of the margin throughout the quarter I mean that sales recovery of March.
And you know a little bit of the lagging from a labor perspective definitely was the big benefit on the margin side. So yeah margin margin definitely ticked up in March on.
The other and were you asking about the other all other operating cost line yes.
Yes.
Yeah. So you know I think the only thing I would call out is just you know the on the number we called out regarding the.
That are in the script on that on general liability insurance.
We did have that that we were lapping from last year.
Other than that you know utilities, we tend to see you know being up a little bit but.
And you just have the normal expenses related to PPE.
On things like that.
But other than that there's really nothing you know and when we talk about PPE you know one of the bigger ones as gloves. I mean, there is we've really seen some spikes in cost on due to the materials that are required to make those and where they come from things like that it's really cause of that club car to be pretty high. So just to give you. Some examples of some.
Of the supplies and things like that that we can keep the kidney he needed the increase.
Okay. Thank you.
Yes. Thanks.
Your next question comes from Jon Tower from Wells Fargo.
Great. Thank you and I would also like the possible on my condolences for the whole, Texas Roadhouse family.
A quick clarification and then the question because most of my questions have been answered I think Gerry you had mentioned earlier some stores operating at 100% capacity I just want to make sure on.
Fully understanding what that means of you're talking about 100% capacity based on state guidelines of 100% capacity within the CDC guidelines of the sixties.
Yes, those are state and local guidelines that we utilize current with all of our partitions and and and obviously trying to understand everybody's a little bit different out there of the bus 60 90 days have been quite of few adjustments, but we are absolutely trying to follow the state and local.
Guidelines.
Yeah, and John on that when it's 100% as we've said before that's not quite 100%. So we're not seeding the bar, we're not seeing all of the tables.
To be able to abide by the state and local guidelines.
Got it perfect. That's what I was wondering at and then there's this is the longer term question of nature, but I am curious we're hearing from a lot of concepts that haven't really open new stores.
They seem to have plans for the next several years to be opening new stores again from a change standpoint, and I'm kind of curious to hear from your perspective, how deep your current new store pipeline is today.
If you're starting to see any sort of hints of particularly in the out years that the.
On the competition for new sites at starting to heat up at all and end rents around that as well if anything any indications that it actually stepping up at all yet.
Nothing that that I've seen you know I think we're lucky.
Texas Roadhouse is of preferred you know lance preferred and renter of land and they like having us.
On their location, so that certainly probably makes it a little easier for us, but you know I think you're definitely given the way the industry is moving you're probably going to see people coming back at you know of restaurants reopening coming back into to the industry. So we'll continue to see how that plays out on.
Maybe you know its possible that that's not as impactful for US just based on our model of you know looking more you know, we're not really necessarily in the malls were not in urban locations.
Tend to be more end you know the residential suburb of areas. So that that could be beneficial you know, we'll see but John we're not really seeing anything right now from a rent perspective or anything like that that would indicate you know things increasing.
And I would just say that we feel very good about our pipeline and we've been really steadily focused on it to continue to look in the positive side and we feel that our growth is very solid as we have performed the last three to five years or probably even 20 years.
We have the same model in place we have our same structure of pipeline.
And we're continuing to move forward, where obviously, we see these numbers too and we're excited about the loyalty of our of our fan base out there and we're going to continue to provide places for them to the.
Pickup legendary food and legendary service and have a great experience. So we are very very focused on that end and we feel good over the next few years that we will use the same model. We have and then we think we can do that 25 to 30.
Every year and at least for the Nellix three to five if not in the next day and hopefully that would be great and then I did want to say before we end. The just thank everyone for your condolences and keep us.
And your thoughts, where we are hurting and were healing boat, but we're strong to the core and we feel like we have a job to do and we're very excited about finished this dance for for Kent. He taught us pretty well and we have a heck of a family here at the Roadhouse and we're very very excited to continue to show respect in la.
Love to Amanda gave us so much in the in the gave so much to the world into the industry.
And I show no further questions at this time I will now turn it back to the management team for any closing comments.
Yeah. Thank you Sylvia and thanks, everyone for joining the call. We hope you all are doing well and if you have any other questions. Please feel free to reach out have a great night.
Thank you all.
Ladies and gentlemen, this does conclude today's conference. Thank you again for your participation you may now all disconnect.
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