Q1 2022 Texas Roadhouse Inc Earnings Call
I'd unmatched value to our guests.
On the development front during the first quarter, we opened three company owned Texas Roadhouse is and our international franchise partners opened an additional two.
We also completed the acquisition of seven franchise restaurants in Georgia, and South Carolina at the beginning of the first quarter.
At this time, we continue to expect approximately 25 company owned Texas Roadhouse, and Bubbas 33 openings in 2022.
And an additional seven Texas Roadhouse franchise locations.
And later this year, we expect to open two company owned <unk> and our first jaggers franchise restaurants.
In terms of 2023, we believe we can lower the impact of permitting and building approval delays. So we are optimistic that we will return to a higher level of openings.
Our new restaurants, including those in smaller markets are seeing strong sales performance, which leads us leads to continued healthy returns on our investments.
This gives us the confidence that we will still have a long runway for new Texas Roadhouse locations.
So we are excited by the sales growth that we are seeing above us and we have a team in place as we ramp up development for the coming years.
Beyond investing in new restaurants, another part of our capital allocation strategy is investing in technology that will enhance the guest experience, while driving greater efficiencies up and down the P&L.
Some of our current technology initiatives. We are working on include Roadhouse, PE kitchen display system and the new Jaggers mobile App, which also includes a loyalty program.
We believe that the upgrades that we have made over the last several years are being widely accepted by our guest.
Ah Roadhouse mobile App has been downloaded more than $3 7 million times since the beginning of 2021.
As a result, approximately 70% of our current to go business is digital and many more of our guests are using the waitlist function.
Finally, as we think about creating value. Our goal is to consistently return excess cash to our shareholders as a complement to our store growth investments. This includes a reliable quarterly dividend dividend, which we have increased by an average of 17.
Percent per year, since 2011 and share repurchases that have totaled over $500 million since we went public.
Before I pass it to Tonya I want to congratulate Chad noble of Fayetteville, North Carolina for being named our 2021 managing partner of the year at our recent conference where the theme was keeping the magic chat as a five time MP of the year finalists who is.
Committed to his team and executing legendary food and legendary service each and every shift it was great to finally be back together with all of our managing partners I'm always inspired being face to face with our operators and seeing their passion.
For Texas Roadhouse, I can't wait to see what they accomplished over the rest of 2022 as they focus on keeping our winning ways now Tonya will provide a financial update.
<unk> for the first quarter of 2020, Kian, we reported diluted earnings per share.
Eight.
At 18, 5% driven by strong revenue and restaurant level profit dollar growth along with a lower income tax change revenue growth of 23, 3% was driven by six 6% surely credits.
15, 7% increase in average unit volume for.
For the quarter comparable restaurant sales increased 16%, including 7% traffic growth and average check growth of 9%.
<unk> includes positive mix of 3% driven by year over year improvement in the percentage of guests choosing dining as well as our GAAP continuing towards our higher priced akshay.
For the first quarter, our restaurants averaged approximately 19500 per week and to get a tail, which represented 14, 8% of total sales as expected our to go percentage decline as we move throughout the quarter, but overall to go sales volumes remained strong we are pleased to see that the decline in year over year to go guests.
During the quarter was more than offset by dining room traffic growth.
Comparable sales grew 17, 5% 25, 4% and eight 8% prior January February and March periods, respectively. As expected the comp percentage dropped off from February to March as we lap the reopening of dining rooms last year from an average weekly sales perspective.
Sales by month grew approximately 120.
Grew from approximately 124000 in January to over 138000 in March.
Comparable sales for the first five weeks of the second quarter were up nine 3% as compared to the same period in 2021. During the five weeks average weekly sales were nearly 135000 with to go sales approximately 18000 per store by 13, 3% apparel.
Dale.
For the first quarter restaurant margin as a percentage of total sales was 16, 4% down 213 basis points as compared to the first quarter of 2021. We also focus on restaurant margin dollars per store week, which were over $21600 up two 5% as compared to Q1.
2021.
Food and beverage cost as a percentage of total sales were 34, 4% for the first quarter. This was 276 basis points higher than 2021, driven by 17% commodity inflation at this time, we have over 70% of our commodity basket secured for the second quarter and approximately.
20% locked for the back half of the year with our current visibility we are maintaining our full year commodity inflation guidance of 12% to 14%.
We continue to expect that year over year commodity inflation will moderate gradually as we move through the remaining three quarters of the year, but as we mentioned previously even if inflation moderates the underlying valid proxy <unk> and other highest items will likely still be higher for <unk>.
Year over year and sequentially.
Labor as a percentage of total sales increased 35 basis points to 32, 8% as compared to Q1, 'twenty one while labor dollars per store week increased 17%.
This increase in labor dollars per store week was driven by wage and other labor inflation of 10, 5% and growth in hours of seven 3%.
These increases were partially offset by a $1 8 million net favorable adjustment to our quarterly reserves for group insurance.
As expected wage and other inflation for Q1 came in above current year full year current full year forecast of approximately 7% because we are lapping lower wage rates as they did not begin to significantly increase until the second quarter of 2021.
Other operating costs were 14, 7% of sales, which was 83 basis points lower compared to Q1 2021.
Rest of the year over year benefit comes from sales leverage due to higher average unit volume.
Moving below restaurant margin G&A grew year over year by nine 8% and came in at four 1% of revenue to $3 6 million growth in year over year G&A expense was driven by increased compensation expense and higher travel and meeting expense as we held several events in Q1 for the first time since the <unk>.
Onset of Covid.
With regards to G&A I want to mention that we just held our annual managing partner conference last week at a cost of approximately $8 million.
Last year's event was delayed until the third quarter and cost approximately $3 million I think it was abbreviated and limited in attendance due to COVID-19.
Our effective tax rate for the quarter was 14, 2%, thanks to a higher than normal benefit from FICA tip credits. We continue to expect our full year 2022 rate of approximately 15%.
With regards to cash flow, we ended the first quarter with $326 million of cash, which is down $10 million from the end of the fourth quarter cash flow from operations was 188 million and was more than offset by $49 million of capital expenditures $32 million of dividend payments and to $85 million of share repurchases.
We also acquired seven franchise restaurants for $26 million.
We continue to expect full year 2022 capital expenditures will be approximately $230 million.
In March our board refreshed, our authorized stock repurchase program to $300 million.
For the first five weeks of our second quarter, we have repurchased just over 350000 shares of our stock for $29 2 million.
Along with our Q1 buybacks leaves us with approximately $266 million remaining under our new program.
Like here you have a truly inspired by the passion of our partners. The confidence it is always great to be together celebrating our successes and I also want to give a special congratulations to Chad Novo for being named our managing partner of the year now I will turn the call back over to Terry for final comments.
Thanks Tanya.
While we are certainly aware of the challenges around the world as well as the inflation and supply chain issues here at home, we are confident in our market position and the unique quality and value proposition. We offer our guests. This has helped Texas roadhouse overcome any challenge or obstacle that has been <unk>.
Thrown at Us and I can tell you with confidence that as an organization, we have the ability and agility to adjust to any challenge ahead that said our guests seem Hungary for our concepts, we have a lot of momentum in the business right now and our entire team.
Is energized, but what lies ahead.
Patients that may have driven the acceleration in the.
Sales.
I don't know if we can pinpoint maybe one one acts as a kind of leading to that I think just the focus that the operators have.
On getting things back up to speed in the dining rooms.
Attributes to that we had some omicron impact early in late in last year and into January .
And we had some calendar shifts in the quarter.
So that benefited us a little bit, particularly in February with Valentine's day, and the Super Bowl.
But I think it's just that focus on technology.
All the things we put in place the last couple of years and the operators focus.
On things I think the gas definitely they experience resonates with them and that's that's helping us for sure. Yes, I would agree I really think it comes down to our ability to execute even when were challenged byproduct and staffing we're finding ways to win and we're delivering on our promise of a legendary experience.
To our guests and just hats off to our operators. They are absolutely out there getting the job done and I think the guests are rewarding them for their execution.
Yes, that's great just a longer term question Jerry in the past the company has always targeted 25% to 30 units a year, but now that Bubba is starting to show growth potential are you preparing the company to open more than 30 units a year and if so what kind of investments or support services need to be added to make that happen.
Well, we definitely are committed to above his growth and like I said, we've got a team in place. We're ready we have definitely been really focused these last nine months on how do we get Bubba is to contribute more growth and I believe that we are positioned there from a support standpoint.
From a leadership standpoint, and I will tell you from a commitment standpoint.
The company, we're ready and so we are feeling really comfortable I don't want to.
Putting too much out there yet, but there is no doubt we expect it to pull its way.
Yes, and I'll tell you we're doing some work on the building. We just opened one in April that has some of the changes to kind of want to wait and see how those work and we have some other ideas to bring that building costs down a little bit.
And I think that's just one of the things we're doing along with the team that <unk> put in place to really get things.
Up and running as soon as we can so we've always kind of said 25 to 30 was the number we feel comfortable being a little above 30, but you know we don't want to do anything too fast we want or just to open restaurants, we said that in the past we want to make sure. We're doing it for the right reasons, we're making good choices on real estate people.
All of those things, but I.
I know Bob is that team they are really excited to grow.
Great. Thanks, guys.
Thank you.
Our next question will come from John Glass of Morgan Stanley .
Please go ahead.
Yeah, Hey, guys. This is this is Brian actually on for John .
First question, maybe just on staffing levels could you comment on kind of how thats evolved since we last spoke if you think you're closer to adequately staff now or what the hiring environment is about Mike.
Well I'll tell you we saw improvement in staffing levels it seemed across the quarter throughout the quarter.
You saw it shifts that appear to be less impacted by staffing issues and the dining room guest counts continue to grow so that gave us a lot of.
Comfort and confidence that the staffing was improving.
And you hear from operators that it does seem to be getting better. So we're still focused on it it's still something that staffing team all of us.
The operators are very much focused on given the volumes are running so feel good about staffing compared to 2019 levels.
Still some probably work out their sporadically across the country in different pockets to really handle the volume of sales that we have today.
Okay, Great maybe just a question on.
Technology, and maybe specifically kind of the waitlist feature that you had mentioned I think it's clear how that kind of helps the gas, but im curious if thats.
Also advantageous for sales maybe in the sense that it helps fill shoulder periods better or what else do you see as kind of the advantage of that or any of the other kind of guest facing tools that you've worked on.
Yes, I think the wavelets definitely to be beneficial on the sales side exactly for the reason is that so when the guest knows that when they come in they're going to get fat within 15 to 20 minutes.
Even if you are giving them a time, maybe later than they want to eat earlier than they want to eat they're more confident in being able to come in and I think that probably does help on we've seen a bit of improvement and when you look at the dining room traffic early dine in guest counts going up.
Our hours between six and eight going up.
So I think having that digital waitlist and it does help and just having the guest comfortable using it using that technology helps us on all other initiatives whether its pay at the table.
Since everybody being comfortable with that that's really good.
Thank you.
Yep.
And our next question will come from David Tarantino with Baird.
Please go ahead.
Hi, good afternoon, and congratulations on such a strong start here to the year.
Mike I have two questions one a bigger picture question about traffic and.
I was wondering if you.
Could share how much the traffic in the restaurants versus pre COVID-19 levels.
I know you can calculate the three year.
Store sales performance, but I'm curious to know how much traffic is up and maybe if you can comment on the dining room, specifically that'd be helpful.
Yes.
In the dining room, Dana the total dining guests they grew.
Each month versus the prior year. So they grew each month of the quarter and in April So that was really great to see and I think in April is really where we saw the dining room guest count surpassed 2019.
So that was very encouraging to see that happening.
You did seek to go come down throughout the quarter two but overall.
Our net impact that looks really good so that was that was certainly encouraging versus.
Two years ago.
Got it and I think with the <unk>.
Combination of traffic now being back above.
Pre pandemic levels in the to go business also being elevated.
Can you maybe.
Give us some perspective on how youre thinking about the capacity of the restaurants, I mean, you've grown so much over the last three years.
I guess, how do you how do you.
Think about.
Potentially taking it through another level over the next several years.
Yes, I think we are.
Still targeting our earlier hours like Don you mentioned those power hours is really about execution and being able to get the folks in the experience that they are craving and then get them moving.
Moving on down the road I guess, but on the same token then that that last night, our maybe even extending a little bit there, but it really comes down to us executing and the power hours and then really trying to drive some folks to the earlier hours in that last hour being able to hold in.
And get that execution piece, so theres still some opportunity I think we feel really really good about how well how will these new stores are executing but we still know we got we got room, yeah, and I think too David when you think about traffic overall the increase in that to go Chapek I think thats.
It's going to be interesting versus you know what that does on a dining room. So while we were slightly ahead of dining room versus 2019, as we continue to move on throughout the year, what can that ballot. What can that capacity be finished that comes down to what can happen in the kitchen and what any any capacity.
You were saying that might exist. There. So I think there is still a little bit to learn it was positive to see that happening in April .
But a little bit more to learn about what kind of capacity maybe in the dining room.
Above and beyond what we're seeing today given the.
The big volume to go that we do now.
Yes.
Thank you very much.
Okay. Thank you.
And our next question will come from David Palmer with Evercore ISI.
Please go ahead.
Hi, good evening. Thank you.
I wanted to ask about the commodity inflation outlook. Your your outlooks very similar to what it was before but I would imagine that's been some gives and takes with that some some costs that have come up during the course of lease since last quarter and perhaps some offsets could you give us some color about that.
Yes, sure Youre right. So we saw the softening a little bit versus what we were expecting.
And that kind of got absorbed by increases on other line items, whether it was Brad mix.
Oils AG, it's things like that so we did see a bit of that other proteins.
Happening, which really is a big range, 12%, 14%, but we were able to stay within it.
And that dynamic so that we did see some of that some of that happening throughout the quarter.
And then.
It's easy for us to forget and back in January .
Data that 60% of Americans, we're comfortable eating out at a restaurant, we're only 60%.
I would imagine there have been.
Certain parts of the country that we're more comfortable than others.
Earlier.
Are you seeing out there.
Generally and even within your restaurants about the consumer comfort levels and do you think that thats.
Our role even now where people are getting more and more comfortable and do you think that that's even having an impact on your labor as well and I'll pass it on thanks.
I would I would say so I mean, if you look at our franchise comps were a bit higher in the quarter and then the company comps and some of that is just driven by the geography of those franchise stores because there is a big California contingency. There. So I think that kind of speaks to the consumer may be being.
Number one they were probably a little more restricted last year on the dining room more than a quarter, but you probably did have that gets maybe a little hesitant to come out and youre seeing that change a bit here.
A year later.
The country as far as I think it kind of give and takes pushes and pulls.
It doesn't it's not it doesn't seem really evident to us when youre looking at the data, but that's a significant kind of a significant driver.
Of things, but it certainly seems positive and probably is helping a bit on labor.
Hard to say or identify that that was causing issues from a labor perspective, maybe folks not wanting to come in and work.
Hi.
Certainly surmise that that could be happening.
I would say that all of the practices that were put in.
Cleanliness of care and concern even partitions are still up I think we still maintained a lot of those practices that ensure people are feeling comfortable about being in large groups and full area. So I do believe a lot of that those practices are helping.
US at this current time.
Thank you.
Thank you. Thank you.
And our next question will come from Dennis Geiger with UBS.
Please go ahead.
Great. Thank you another one on commodities and then maybe beef in particular, just wondering if you could kind of touch on some of the considerations that.
Maybe could drive some upside or downside into into the back half outlook.
Recognizing it's a little bit about.
Crystal ball question, but are there any kind of key things that you would that you would frame that could drive that outlook, one way or the other based on where we sit today.
Yeah.
Yes.
Another number of things that.
We kind of watch and keep an eye on that could determine.
Upside or downside, what the retail markets in doing what's happening in the grocery stores things like that.
They are kind of marketing piece and things always seem to have a bit of an impact.
It can affect demand our supply of product too.
If they have a bigger demand for it but on.
So that's probably one anything going on with imports exports can always be impactful one way or the other.
And I think it's just the supply obviously, whether we haven't really been talking about weather at all the last couple of years, we've been talking about other things, but whether it could certainly play a part in that to add to that.
<unk> corn and corn prices grain things like that so all of those things are things, we're watching supply of cattle.
How thats working.
<unk> to be in a good spot right now, but there could be some uncertainty in the back half of the year that could change that right now as we.
Indicated we're a lot less locked on beef in the back half of the year and so that leads that in itself lends itself to uncertainty. It's just a little tougher to get those deals done right now that far out.
So it's something we're definitely continuing to talk to our Packers our suppliers.
How everything is feeling what it's looking like but could be some upside on the rest of the commodity basket outside of beef.
Who knows how long some of these increases were seeing in the last.
They're driven a little bit differently than maybe the beef is.
And we'll just continue to keep an eye on things.
That's helpful and then just on pricing.
Based on what you've seen or kind of the lack of resistance to the pricing maybe it's a bit early but as you think about sort of back half of the year or rest of the year pricing decisions that you and the operators are or considering any color to kind of provide at this point.
I assume given the importance of that long term margin target given you got such strong traffic right now.
Anything to share on the <unk>.
I'll look there thank you.
Yes, I'll take that one I think we're going to continue to use our same process as we get a little closer to making that decision. We will gather that information from our operators and see what's going on in their particular markets and then make the best decision we have to make a decision for our consumer.
And for our business and we will study it.
We'll continue to try to be very conservative and I know these last couple maybe didn't show that but we are committed to.
<unk> taken care of both the business and the value to our guests. So we will study do our due diligence.
Make the decision that we feel is best for all.
Thanks, guys.
Yes.
Our next question comes from Peter <unk> with.
Thank you.
Please go ahead.
Great Thanks, and congrats on the quarter.
I know your numbers don't really reflect this.
At all with your mix numbers, improving but is there any evidence of trade down within your menu.
Regionally or otherwise as gas prices went up through the quarter.
And then to April have you seen any evidence of that or consumers still continuing to trade up to those higher price sticks.
Yes, we're not seeing that right now Peter it looks like mix is getting driven by a couple of components. One is just that move from to go to dining room, which helps the mix and then the other is we continue to see folks going to a little bit higher priced entree. So that happened in Q1, I think we've talked before.
For that we start lapping that.
April and so that will that will be a little less impactful.
The higher priced entree thing like that will be a little less impactful heading for the rest of the year.
And probably the to go and go dining room dynamic will be a little less SKU.
Those dining room to go kind of leveled out in.
April may.
So I think that'll be a little less impactful also as you head into the rest of the year. So next probably you won't see this size of mixed benefit the.
The rest of the year, it will probably be a little more neutral.
As we continue throughout the year.
Great and then just could you comment on.
Two unrelated questions.
<unk> labor turnover I know you said you've seen some improvement in hiring but what are you seeing on labor turnover and then just lastly.
If you take no more price for the balance of the year can you just give us what the pricing embedded in the comp will be for the remaining three quarters.
Sure Peter I'll give you the pricing first and then we'll talk about on that.
Turnover piece.
For Q1, Thats about that was about 6% pricing Q2 will be seven and a half.
As you will have.
Full effect.
Or a partial effect actually of that.
Three 2%.
Q3 will be seven four and then Q4 without any additional pricing would be $4 one.
And then on the labor turnover, yes sure.
Turnover side of your turnover continues to be high.
At the hourly level I think that's just the dynamic we're probably going to live with for a little while on staffing has gotten better.
The training costs things like that will probably stay up a little bit.
As we continue to we're very focused on the turnover as far as providing good good training to our employees development and holding on to that in the past that 90 days, which tends to sometimes be kind of the point.
They leave and then on the management side.
Turnover it ticked up a little bit from a very low levels, where we were.
And I think we continue to see that kind of hang in maybe be a little lower as we continue throughout so not really any change on the turnover side I would tell you from kind of what we've done before I'd say were pretty flat to where we were we definitely haven't peaked or gone any higher.
I actually think it's starting to come down just a hair, but that's a good sign so we're going to hope for the best on that but people are settling in staying put.
Thank you very much.
Thank you.
Okay.
Our next question comes from Brett Levy with <unk> partners.
Please go ahead.
Great. Thanks for taking the question.
You started to say that.
You were getting optimistic about development and it sounds like now that you have a little bit more skin in the game with CAGR and Bob is showing some momentum.
How are you thinking about.
What are realistic.
Next level as we will say not just the next three years, but maybe the next five to 10 years.
Where do you think you can go can you used to use of $7 50 number and then.
Separately with respect to all of the technology and equipment Rollouts.
Can you give us a rundown and where you are in terms of.
What's been implemented and what you expect to see over the course of the year, both in implementation as well as any kind of cost of sales productivity.
Yes, sure on the technology side of things on the Roadhouse pay we talked about which we talked about before that in test being rolled out not in a lot of stores right now about 100 I think.
And the goal would be to get that.
For the most part rolled out to all stores by the end of the year is kind of what we're targeting.
So that's but that person has been going really well.
We've done a test with handheld online ordering handheld to order at the table.
So in a little bit slower being tested and we will continue to keep an eye on that on the GDS systems, we've implemented that in one new restaurant for Texas Roadhouse, and we have an implementation in an existing restaurant coming up later this year, so going a little slower with that one and we'll see how that goes and then the jaggers App has been.
Pretty recent the upgrade to that which is really cool.
Adding that loyalty program. So that's that's been implemented rolled out and we'll continue to see how that drives for it. So the weightless technology that we talked about digital waitlist in the App with Texas Roadhouse, that's been rolled out for a while has been implemented so let's get to see that data coming in and see that being very successful.
For sure.
And then on the growth side.
Believe that we are optimistic about some of the smaller towns that we've been able to go in and have success.
So on the roadhouse side that gives us confidence that we can continue on.
The larger areas, but now we can you can also expand through maybe.
Smaller communities.
We would fit into and feel good about bubbles, obviously, we're committed to bubbles and growing it and continuing to see success, there and with the vision and then jaggers is still very exciting. We really are confident we have the two franchise partners that are signed one will get a store open this year one should be very early.
Next year, we continue to work on company stores to get that growth going in and so.
So we are excited we are behind them.
Really setting a lot of things up for them to contribute at a much bigger level and they are right now.
Thank you.
Thank you.
Our next question comes from Jeff Farmer with Gordon Haskett.
Please go ahead.
Right. Thank you and just looking for a little bit of detail on the wage rates specifically, how does your wage rate inflation compare in the front of the house versus the back of the house.
Yes, the wage rates are going to be up a bit more in the back of the house, that's primarily where that insulet wage inflation is going to lead <unk>.
<unk> front of house here for most of them are on a tip wage.
So there is in states, where you're seeing tip wages go up that's impactful.
And then most of the time Youre looking at the minimum wage going up and that definitely more impactful in the back of house than the prime.
Overall, it was wage inflation was a bit higher in Q1 as expected because of the volumes.
The sales volume change in what we're lapping from Q1, we expect that.
Now with the shifts more from that to go to dining room.
It should moderate a little bit.
On the wage labor side throughout the year and wage inflation side throughout the year is our expectation right now.
That's helpful. And then just one more so a lot of industrial focus on your commodity basket.
I think this was roughly 50% of the.
The spend.
<unk> costs in 2021, but then again investors are looking to dive a little bit more deeply beyond that so once you get past beef what are the next three or four largest commodity exposures for roadhouse and can you help us understand how your contract or do not contract for those exposures.
Yes sure. Yes. This is just a little over it's kind of in that 45% 50% range.
Is where that lands a little closer to 50.
Our other proteins pork chicken seafood youre getting around 15% of the commodity basket.
And then <unk>.
<unk>, which is your bread mixes oil things like that includes <unk>.
That runs.
Call it another 10% to 12%.
Produce is about.
About 80% of the basket.
Dairy another five.
I think all of those add up Jeff I hope are getting pretty darn close to the total of 100%.
But that's kind of how we are there.
The other proteins I believe we have quite a bit of the swaps app I mean, primarily or looking at pork and chicken seafood, a little bit smaller piece of that basket.
So thats something we treat very similar to <unk>, we'd like to be as long as we can on those prices.
And on supply.
Grocery and ethane will be locked on some of those items oil.
Bacon thing, we kind of put that in that in that grocery bucket.
Protein is not as much we don't lock up as much of our produce from a price perspective, so we focus on locking up supply, but not as much on price.
So thats really kind of the way we look at it the entire commodity basket from that perspective, I hope that kind of what you are looking for it yes, exactly what I was looking for thank you guys.
Mhm.
And our next question will come from Andy Barish from Jefferies.
Please go ahead.
Hey, guys.
Okay.
Two follow ups.
You didn't.
Commodities I mean is it kind of a.
Steady decline down from these first quarter levels, given what you know today and what the last word from last year.
Yes, I would.
It's pretty steady I mean, 17% for Q1 came in a bit softer than we expected as you. All remember we were guiding to 17% for the first half of the year. So our expectation would be that Q2 would be a bit lower and then you would see even a bit lower than that in Q3, four because that's when we.
Lapping the higher costs last year really started at the beginning of Q3.
So that would kind of be how we build out to get to that 12% to 14% in that range.
Gotcha, and then can you just help us Tanya on.
Seasonality of the business over the next couple of months just as we go into the slower summer.
The 135000, a week in April is still phenomenal but.
May and June typically slow down a little bit.
Yes, that's typically slowdown.
Little bit.
Interesting that last year, you didn't see that slowdown if you look back at average weekly sales throughout the year, we didn't really see as much seasonality.
On the period, but mother's day is in May that's usually a big time for us and you do see some softening in the summer months and then it kind of picks back up again in Q4, yes.
And then we've got father's day, obviously in June .
We have seen an interesting a lot of times when the school season, a recession is in bulk.
We are really where you would slow up there on Monday through Thursday, A&P busier on the weekend. So I guess with some of the kids still not completely schools wide. Open then we're probably not seeing that same slowdown during the week and we're really continuing to see that progress through the weekend and then in the summertime we really.
<unk> do get busier during the week and maybe the weekend slow up a little bit when the weather is good but it can hold mostly in probably till we get back to the school season in late August and September when it really softened.
Yes, I would imagine those special occasion.
And holidays have been really strong as well I would say compared to.
Historical levels.
Yes.
We are as we are here in Louisville, anticipating the kickoff of the Triple Crown.
Kind of in the restaurant World, We call Valentine's day mother's day and father's day, our triple Crown. So we not only get to do the first leg here in Louisville, and then we get to do the second leg in the restaurants, because mother's day is Sunday don't you all forget that you better get or a gift card to Texas, roadhouse, where take or they're yours.
Selves personally would be awesome.
And then and then the Derby on Saturday and have a good one.
Yeah, what a weekend it is going to be.
Our next question will come from Jim Sanderson with Northcoast research.
Thanks and.
Hey, Thanks for the question and congratulations on a great quarter just wanted to go.
A little bit of help on understanding how historically the U S. Consumers reacted during really intensely inflationary times I am looking at higher gas prices higher food cost on our mortgage expense rental expense just how does <unk>.
On your experience in the past how do you expect.
Consumer to navigate all of this and continue to dine out of Texas Roadhouse. Thank you.
Well, what we can look back on was probably eight or nine.
I think our commitment to heating sides, and keeping our <unk> strong and making sure that that food that we deliver on that fleet is our reputation and not wavering from any portion size is not wavering from any execution and just continue that's what really when we look back and discuss.
How do you get through difficult times, you deliver on your promise and I think that we are committed to that we're going to continue to put every portion that we have on that plate are heaping sides are our smoking Hot Stakes.
And just everything that we do we believe that that's what will carry us through because we don't know how difficult it is going to be but what we want the consumer to rely on is our ability to consistently deliver on what they want when they come in that door. So that's really what we can live on it just do the best.
We can of what we do.
Understood and just a quick follow up question I think you mentioned your to go sales had declined slightly.
But im wondering if thats, primarily consumers swapped in the to go order for dine in order and if your delivery portion of those to go sales are relatively stable you can kind of speak to how that delivery portion has held up or not.
Yes, well, we don't do any delivery per se.
Got it.
John to get to get that.
Really don't have that Keith I think we see sales.
Very stable over 18000, a week and that gives us a lot of confidence that those to go sales continue to be sticky, even though the percent as percent of sales comes down we actually like that because that means the dining rooms going up and that's a good thing. So all of that continues to look to look good even though you are.
You are seeing a little of that as we lap all of the restrictions from last year and things like that.
Alright, Thank you very much.
Mhm.
Our next question comes from Jon Tower with Citi.
Please go ahead, thanks for taking thanks for taking the question I appreciate it just a few if I may.
Gerry you mentioned the idea that youre, having success penetrating these smaller towns with the Texas brand and I'm curious to know.
Are you doing anything to the footprint of the stores to accommodate potentially smaller volumes or perhaps even reconfiguring the kitchen at all such that.
Overall footprint of the store might remain the same but youre doing a little bit more.
Square footage in the dining rooms at all anything Youre doing that way would be digital source in the smaller markets.
Yes, we haven't changed our footprint, we tried that once and we call the small town prototype and within a year and a half we had to do two add ons to it. So we feel like that our prototype we just need to execute and know that we're going to satisfy the consumer in those.
Markets, because a lot of those times, they're coming from other counties. They will drive a little further to get to some place that they feel very confident in and fortunate for our reputation people will drive and even if we look back at our one of our very early restaurants Ashland, Kentucky.
It's one of our highest volume stores forever, and 40, Uptown or 40000 people, but they come from all over just because of that reputation. So maybe ashland part of 2008 years ago that we could go to small towns as long as we execute and deliver on our promise of legendary food and legendary service.
They will come find us.
Got it. Thank you and then thinking about you've made the comment earlier about.
Lower permitting issues such that growth next year may could.
Can you give us a read on how you're how you're doing that what specifically you're doing to ensure that the speed of opening new stores is picking up.
Well were hopeful from what our real estate team is telling us that permitting has been a little delayed recently or I say the last couple of quarters and it does look like they are starting to process things a little quicker. So we're optimistic that we're going to we're a little ahead of the game knowing.
They're running a little behind so we're actually been a little more aggressive in the front than we normally would be to ensure that we're not having deals pushed because of delays in permitting and some.
Some of that side of it so I guess, we're anticipating a little better and actually being a little more proactive which is giving us a little confidence that we'll be able to get these things done closer to on time nothing seems to be completely on time right now, but we're getting closer and some of it John is just building the pipeline out a little bit more so you have some choices.
Susan can be flexible if you do have something plus you can.
Obviously with a different deal and things like that so some of it is that too.
Okay makes sense and then just lastly for me on pricing power obviously.
<unk> for your brand is phenomenal right now and it doesn't sound like so far does any pushback on recent pricing. So can you discuss how you look at pricing power for the brand in that or are you looking at competitors the at home occasion.
How you're really index your pricing power and then really.
Thinking about the check sizes.
How much more.
Pricing power do you think you have as a brand and if and when you feel necessary to take it.
Yes, John I can tell you just some timing, we really don't talk about pricing power or talked about it in terms of pricing power. When you talk about what kind of pricing do we have to take given the inflationary environment, what's going on with Gary mentioned earlier, what's the right thing for the operator and the guest.
Turning to take as little pricing as we have two regardless of what pricing power really kind of is I think that.
That's really worked to our benefit recently as we've with the inflationary environment had to go a little bit higher than normal.
We allowed ourselves to be able to do that a little bit more because we happen.
So.
Disciplined on what we've taken so but we absolutely when we talk about pricing with the operators. We're looking at competitors. We wanted to make sure we're maintaining a good gap.
We're chat we're understanding that in each and every market.
It's really important in the process for sure.
Great and if you look at home.
Big prices at all what you are seeing in the retail channel.
It's also a benchmark.
Not a whole lot because that changes that.
Yes.
So we just don't tend to really watch that once you match.
For that reason.
Okay, well, thanks for taking the questions.
Thank you.
Okay.
Our next question comes from Brian Vaccaro with Raymond James.
Please go ahead.
Thanks, and good evening I was hoping to start with a quick follow up on commodity inflation and I just wanted to confirm.
We're up 12%, 14% annual inflation outlook I understand youre less locked on these in the second half, but you penciled in is it right that you've penciled in a year on year increase on beef in the second half within that annual guidance.
Yes that is true because you use sequentially continue to CD prices go up.
And theyre going up versus what we saw last year not to the same.
The trend that we've been seeing not the same level of increase but still increasing at this time, it's kind of is the expectation.
Okay. Thank you and then.
Labor.
No you said hours are up 7% year on year, I believe and I think that might be up one one and a half something like that if our math is right versus 2019 levels. If it's relevant measure against that anymore, but I assume there is some impact of omicron within within your hours for the quarter, but could you just give us a sense of where our.
Those are trending more recently in March April may be versus 19, or however, you'd like to compare that and then just the degree to which you see hours building as traffic continues to recover.
Sure Brian .
Really tough to say kind of what the expectation is going to be on that because there are lots of it depends on the traffic levels are as far as what those growth in hours are but youre absolutely right. I mean, the numbers should be coming down I can't speak to April and May what we're seeing today.
Our expectation would be that growth in hours, probably comes down a little bit more driven by the mix change between to go in dining room.
Because we know that to go is a higher cost higher wage costs, but a lower hours amount on it together.
So that's kind of how that we probably would think about that changing so other than that and it's hard to it's really that's a tough one to nail down to pin down right.
Right now as you all saw growth in hours was 7% pretty much in line with traffic for Q1, but that would not be our expectation. Maybe you can just give me the rest of the year.
Training hours in there too that kind of helped elevate that a little bit just depending on the staffing levels must be.
But otherwise.
It's going to depend on traffic and that that dining room to go next and and things like that.
Understood. Okay, and then I also just wanted to touch on the other operating cost line in the quarter. It looks like costs ticked up a bit versus the last few quarters or is that just broader inflation creeping in or perhaps there were some temporary pressures in there we should we should be aware of.
No I don't think Theres anything in there that I would call out on a temporary or one time basis.
Really what we're seeing is just that that inflationary pressure continue on supplies and.
Utilities things like that.
Laundry and linen and those types of categories.
Okay, Great I'll pass it along thank you.
Thank you.
Our next question comes from Rob <unk> with J P. Morgan.
Go ahead.
Hi, guys. This is rahul on for.
John I Havent got thanks for taking my question I just have a quick question on the inflation regarding the construction costs look so far into the year can you give us some color on what you have been seeing.
In the last year I've seen numbers from their report on like $6 million for Texas Roadhouse are like <unk> 5 million part of joggers.
Just trying to understand like going forward like if youre seeing any inflationary pressures.
Affecting your overall costs like not just pointed to but like going forward.
<unk>.
Color there would be helpful.
Yes, I mean, you always have a little bit inflation on the on the building cost obviously, we're seeing it a bit more here in 'twenty two.
For sure and whether how long that lasts or if that abate a bit.
In the future I think that's going to be really hard to tell.
And when that might happen. So we're looking at when we look at the cost increase on on road Hamzah, we're expecting between 22 and 21 a portion of it is driven by building and site work I am really not as much on the furniture and equipment things like that.
And then you see a little bit of it.
Just on the rents being up just to touch so that's kind of what we're seeing and the same thing is happening at Barber is although we are saying is cost probably remain flat.
<unk> 'twenty one so that is really just the nature of some of the deals we get in 'twenty one.
But we are beginning to as I mentioned earlier implement some savings there on the building side with buybacks.
I think that will.
We will continue to keep an eye on that and see what's happening, but definitely seeing inflation.
On the building cost side of things.
Got it.
And then just a quick follow up on the labor side.
Regarding the turnover you guys started like you did see some higher turnover.
Recently I'm just curious if there are any specific initiatives you guys are planning to mitigate that or like even like say do something better or what the industry hasn't done before like I'm. Just curious if you have any thoughts to share there.
Well on the on the turnover side the increase really hasnt been as recent it's been over the last couple of years through the pandemic and everything that we've seen a bit more of that and we made a lot of investments from the benefits side.
Folks and a lot of it just inside the four walls of the restaurant.
The operator, when it comes to higher rate train right cheat right. So it's about providing development opportunities talking about really great training, providing great training to our employees.
Turning to Worksite, Texas, right after a little different than many other restaurants, because its so busy the volumes are so high. So it just requires a little more training from that perspective for them to kind of understand how that just how to execute that.
Got it.
Thanks for taking my questions guys.
Sure.
And our next question comes from Lauren Silberman with credit Suisse.
Please go ahead. Thank you very much. Thank you so much I wanted to ask about just mistakes segment more broadly.
Very strong performance and clearly you've consistently outperformed but any thoughts on why you think the big segments are strong and outperforming the broader full service just as we think about the resiliency of the category in any consumer environment.
Well I can only speak for us, but I do believe that our made from scratch philosophy, we work a little harder to make sure that the plate that we delivered to you has got really good flavor and it served us very well.
Body that's out there I'm sure is trying to fight for some some reason for the consumer to pick them.
Our made from scratch philosophy has served us very well, we will continue to do that but I think the stake is a big part of our menu, but we have a lot of other offerings that are are very popular also.
I really do think it is about the consumer wanting a quality product at a reasonable price and Thats, what really has driven our success and the ability for us to execute our people are amazing.
Great. Thank you so much for that and then just another one as we think of these costs over the next few years any expectations on the herd size and willingness for ranchers to anchor supply just trying to sort of think about the puts and takes there.
I mean that would certainly be the hope there is some motivation for them to continue to grow to add to the herd sizes and things like that there's so many inputs that go into that though lauren with the cost of grain and the prices that they're getting.
With the Packers so.
Hope to see that happening don't really have any insight into if that will happen or when it could happen.
I remember back when we thought such as we went through is such a big cycle and beef inflation.
For about five years, or so and it was driven by a really big drop in supply the supply of cattle.
No even today that we are back at the same levels.
Suppliers as we were back then so something we feel I'd just say that from the standpoint, it's something we feel we can manage for sure and manage through but I don't.
How that will play out here over the next couple of years.
Thank you very much.
Okay.
And that will conclude today's question and answer session I would like to turn the call back over to Tony Robinson for closing comments.
Alright, I just wanted to say thank you guys for joining us I hope everyone's doing well if you have any additional questions feel free to reach out to have a great night. Thank you all.
And this will conclude today's conference. Thank you for your participation and you may now disconnect.
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