Q1 2023 Texas Roadhouse Inc Earnings Call
Good evening and welcome to the Texas Roadhouse first quarter earnings Conference call.
Today's call is being recorded all participants are now in a listen only mode.
After the Speakers' remarks, there will be a question and answer session.
At that time, if you would like to ask a question. Please press Star then the number one on your telephone keypad.
Should anyone need assistance at any time during the conference. Please press star zero and an operator will assist you.
I'd now like to introduce Michael Balan head of Investor Relations for Texas Roadhouse, you May begin your conference.
Thank you Breanna and good evening I know each other that you should have access to our earnings release for the first quarter ended March 28, 2023. It may also be found on our website at Texas Roadhouse Dot com in the investors section I would like to remind everyone that part of our discussion today.
They 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. These.
These documents provide a more detailed discussion of the relevant factors that could cause actual results to differ materially from those forward looking statements. 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 the prepared remarks, we will be available to answer your questions in order to accommodate everyone that would like to ask a question. We kindly ask analysts to please limit yourself to one question now I'd like to turn the call over to Jerry.
Thanks, Michael and good evening to everyone.
Many of you know, we just returned from our managing partner conference, where we sell it celebrated our 30 year anniversary with our operators well, we took some time to honor our past our conference messaging was focused on our future, which will continue to be shaped by staying true to our values and our mission of legendary food and legendary.
Service, our operators commitment to our mission was evident during the first quarter, which was highlighted by record guest counts and double digit increases in both same store sales and earnings and during the first quarter, our restaurants averaged $148000 in weekly sales include.
<unk> more than $19000 in to go sales.
We are still seeing improvement in year over year staffing levels. Thanks to our hiring training and retention efforts increased staffing levels allow us to continue our top line momentum and also focus on maintaining our high food quality standards and delivering a legendary guest experience.
On the cost side of the business inflationary pressures are mostly in line with our projections and commodities are performing as we expected.
The tightening cattle supply is keeping beef prices elevated while we are experiencing some moderating inflation in other areas of our overall basket.
And on the labor side wage pressure has been persistent as it remains a competitive hiring environment.
For the first quarter development, we opened four company owned Texas Roadhouse is and two company owned Jaggers. In addition, one international franchise restaurant opened in the Philippines.
We also completed the acquisition of eight franchise restaurants, located in Maryland, and Delaware at the beginning of the first quarter.
At this time, we continue to expect to open 25 to 30 company owned Texas Roadhouse, and Bubbas 33 restaurants. This year as well as three company owned Jaggers. Our franchise partners are on track to open approximately 10 international and domestic restaurants, including two jaggers.
We also continued to invest in technology to improve both our operations and the guest experience Roadhouse pay which is our pay at the table system that has now been rolled out companywide. In addition to the guest convenience during the check in change period.
Roadhouse pay also allows us to sell and redeem cards gift cards and promote sign ups for our VIP loyalty club.
Additionally, we are having great success, with our digital kitchen, and improving Cook times order accuracy and other operational efficiencies.
The majority of our openings. This year will include a digital kitchen system and we continue to convert some existing restaurants to the digital format.
On capital allocation, our strong cash flow generation during the quarter allowed us to grow our dividend by 20% continuing repurchasing of shares and further strengthen our capital position by repaying the remainder of our debt.
Importantly, these actions were taken together with our reinvestment in the business as we spent over $100 million on capital expenditures and franchise restaurant acquisitions.
Overall, we believe our ability to reinvest in the business, our strong balance sheet and our disciplined capital allocation strategy, all create a competitive advantage, which will allow us to generate long term shareholder returns.
Finally.
I want to give a huge shout out to Brad Apcar, our 2022 managing partner of the year from College station, Texas.
We also named Rob all of Colorado Springs, Colorado, Our first ever Bubbas 33, managing partner of the year.
Want to congratulate Brad and Rob as well as all the finalists from both concepts for their accomplishments in 2022.
And I also want to congratulate Daniel Rivera of Covington, Louisiana for being named our 2022 meat cutter champion.
And Steve Zero for being named our support center roadie of the year.
Our conference is a time to celebrate our successes as.
Recognize our top performers focus on the future and just as importantly, how some fun after.
After spending a week with our operators I can tell you that we have already all returned home energized and ready for the remainder of 2023 now.
Now Michael will walk you through our financial update.
Thanks, Jerry for the first quarter of 2023 revenue grew 18, 9% driven by a 12, 5% increase in average unit volume and 6% store week growth.
Restaurant margin dollars grew 15, 2% to 2% to $185 $7 million, while earnings per share increased 18, 4% to $1 28 per diluted share.
Comparable sales increased 12, 9% in the first quarter, driven by seven 6% traffic growth and a five 3% increase in average check.
By month comparable sales grew 21%.
10, 6% and nine 3% for our January February and March periods, respectively.
And for the first five weeks of the second quarter weekly sales averaged over $145000 with comparable sales up eight 6%.
This includes the benefit of the two 2% menu price increase that we took at the beginning of the second quarter.
For the first quarter restaurant margin as a percentage of total sales decreased 53 basis points to 15, 9%. However restaurant margin dollars per store week, which we believe is a more relevant metric for us were up eight 7% and hit an all time high.
Of over $23500.
Food and beverage costs as a percentage of total sales were 35, 2% for the first quarter. This was 78 basis points higher than 2022, driven by eight 9% commodity inflation.
As Jerry mentioned commodity costs have been in line with our expectations. So far this year with approximately 75% of the overall basket locked for Q2 and approximately 40% locked in the back half of the year, our full year guidance for commodities remains unchanged at <unk>.
5% to 6%.
As a reminder, we continue to expect the rate of year over year inflation to moderate as we move through the year, Therefore second quarter inflation should decline sequentially, but still be above our full year guidance.
Labor as a percentage of total sales increased 23 basis points to 33% as compared to the first quarter of 2022.
Labor dollars per store week increased 13, 1%, primarily due to wage and other labor inflation of 8% and growth in hours up four 8%.
Similar to commodities, we expect the level of labor inflation to moderate as we move through the year.
At this time, our full year 2023 guidance of wage and other labor inflation between five and 6% remains unchanged, but current trends would put us closer to the high end of that range.
Other operating costs were 14, 3% of sales, which was 35 basis points lower as compared to the first quarter of 2022, most of the year over year benefit comes from sales leverage due to higher average unit volumes.
Moving below restaurant margin G&A grew year over year by 23, 8% and came in at four 2% of revenue.
The majority of the $9 6 million dollar increase in year over year G&A expense was driven by higher compensation expense, including approximately $2 $6 billion of one time cost.
Our effective tax rate for the quarter was 13, 9% and we continue to expect a full year 2023 income tax rate of approximately 14%.
Lastly, with regards to cash flow, we ended the first quarter with $156 million of cash.
Cash flow from operations was 189 billion. This was more than offset by $67 million of capital expenditures $37 million of dividend payments.
$50 million of debt repayment $10 billion of share repurchases and the 39 billion dollar acquisition of eight franchise restaurants, our expectation for full year 2023 capital expenditures remains approximately $265 million now I will turn the call back over to Jay.
<unk> for final comments.
Thanks, Michael.
Want to close the call by thanking the 85000, plus Roadies, who keep our mission alive, each and every shift as well as our vendors who have been key partners and our success.
I also want to thank our loyal guests, who continue to support our restaurants and allow us to provide them with legendary food and legendary service.
Given our industry, leading operational performance and strong balance sheet, we have a lot of flexibility at our disposal to create shareholder value in the future.
Speaking of the future the theme of our recent conference was just getting started.
I can promise you that while we will always honor and celebrate our history. We feel like we are just getting started on writing our future.
That concludes our prepared remarks, operator, please open the line for questions.
Thank you Mr. Morgan, ladies and gentlemen at this time, if you have any questions you can press star one.
Find your question has already been addressed you can remove yourself from the queue by pressing star one again.
As a reminder, we ask that you please limit yourself to one question.
Your first question comes from Joshua long with Stephens. Your line is open.
Great. Thank you for taking my question.
Was curious if we could talk about some of the initiatives at the store level that helped drive the strong traffic during the quarter, obviously legendary food legendary service.
Resonates well with your guests, but curious if some of the many initiatives or maybe other focus points that have allowed you to broaden your reach adds value and can bouncing that overall experiential component that you're well known for starts to resonate with a broader set of guests going forward. Thank you.
Yeah. Thank you Joshua.
I believe that our focus on executing a great shift will always be and as we have been able to hire and train and get staffed up in and more about the retention of our people as they get more experience and more reps on running shifts in whether it be front of the house or back of the house I, just believe that really and truly it comes down to our one.
<unk> to execute to get people in get them the experience that they're looking for and thank them for coming and joining our business that night is the real focus we are very much on target for that getting staffed is a key component to our continued top line success. Thank you.
Your next question comes from David Palmer with Evercore ISI. Your line is open.
Thanks, Good evening, Jerry I know you're committed to that.
Long term framework of margins being in the 17% to 18% range, but I'm trying to think through how you might get there.
Obviously, we're in a beef cycle and we're going to be probably dealing with above average stake inflation for the next couple of years.
Given that that's the case I'm wondering you know we might just be stuck a little bit below that range for a while and that's fine, but I'm wondering if there's other offsets that you think could happen or that you think are maybe happening internally that could make you get there with even an inflationary environment like we're likely to see thank you.
Yeah. Thanks, David you know, we're always looking at how to get back to that point, we've made some progress I think from quarter four to quarter one.
Although we still have some improvements to do the labor inflation.
We know what it's looking like going into the rest of the year beef inflation, Michael can talk to in a little bit that is kind of holding up in that area. That's a little higher but we hope that our digital technology is teaching us to be a little faster when we expedite our food through the kitchen Roadhouse pay is definitely another.
Enhancement to the service level, and maybe even a little bit of the speeding of the table turn so we have several things that are doing to allow us to continue to elevate how many guests we can get through the building and in any given day, which as obviously the inflationary pressures settle we will.
Help us get back to that we are excited about our restaurant margin dollars in our top line continues to really do extremely well for us. So we're going to have to continue to focus on the efficiencies of the business and look and what we can learn going forward.
Thank you.
Thank you.
Your next question comes from Brian <unk> with Morgan Stanley . Your line is open.
Yes, hi, there good evening.
Could you elaborate on that Gerry.
Are there any.
You could say about the is the stores that have roadhouse PE have you in fact measured kind of faster table turns and then like with the digital kitchens for example.
Have you seen faster throughput there I'm just curious about some of the specific things you've observed as and you put some of these technology initiatives in place.
Yes.
On the Roadhouse pay there is no doubt that in our opinion the guests can pay at their convenience. So if they're in a hurry there theyre not waiting on any one to come do their check and change. It is on the table. It is readily available we have gotten great feedback not only from the guest but from our operators. So we <unk>.
Absolutely believe that the guests that want to get in and out they definitely have the ability to execute that on their own.
On the digital kitchen, we have for up and running and currently we have two new store openings and we converted two and like we said this year. It looks like we will do all of the new store openings, approximately 20 or more than 10.
Conversions and all the indicators right now Brian are that we are going to see our food hitting the window in a timely manner, which should save US time all of the indications right now and it's very early that it should save us some minutes and if it can do that then that can really help us and our power hours might even.
Let's turn to the restaurant another half a time to a whole time. So that's what we're seeing the efficiencies on the back of the house side of a digital kitchen is more about the production seats and how we do some of that but the technology from what we're seeing right now is very encouraging as to how it will help us be more efficient business.
Overall, when it comes to getting our food from the kitchen.
Thank you.
Thank you.
Your next question comes from Peter Saleh with BPI.
Your line is open.
Great. Thanks for taking my question and congrats on the quarter.
I just wanted to ask about the just.
Consumer behavior in general I think over the past quarter or two there was some.
Negative mix that you guys were seeing in that in the numbers, maybe soft drinks up alcohol down has there been any change in consumer behavior, and how they're spending or using your menu or are they trading down at all trading up at all just any details around that would be helpful. Thank you.
Hey, Peter it's Michael Thanks for the question I think a lot of the trends that we were starting to see.
In the.
In February and March.
Certainly continued into April and not really seen a change in that but but during that time period. We.
We have seen that that alcohol mix.
It has remained negative again steadily negative.
Not going further and we're still seeing some negative mix in that entre category, which can be a few things theres certainly some guests who may be doing a little bit of check management, but as I also mentioned on the previous call. I think we are seeing new guests coming in.
To Texas Roadhouse and may be.
Starting at the lower on the value side of the menu. So it has held very steady I don't think it has anything to do with our menu pricing or the menu price increases that we have taken because we've seen no change during that period.
Certainly our guest volumes tell us that people still want to be a roadhouse, but we've seen maybe a little bit of trade down, but I'll I'll end with a comment of.
Our mix is still extremely positive relative to pre pandemic levels. So we missed we might just be giving a little bit back now that people are watching their pocket book a little bit more.
Okay.
Thank you.
Your next question comes from Jeffrey Bernstein with Barclays. Your line is open.
Great. Thank you.
On beef and the related potential pricing.
I'm just wondering if you can give a little more color on what youre locked in specifically on beef as we look to the rest of the year.
I feel like in past cycles, maybe management was not keen to take price to mitigate because we know beef goes up and down in price was really more reserve to offset structural more labor type inflation. So I'm wondering if that's still the.
The sentiment as was raised earlier, maybe we should just assume in the short term that.
You won't necessarily price to fully offset it and let the margins take a hits that you can kind of maintain your industry, leading traffic just trying to get a sense for whether that thesis is unchanged and specifically around the beef what the outlook is for the rest of this year. Thank you.
Hey, Jeff. Thanks for the question, it's Michael I think your thesis is pretty on point.
We're not going to get into the specifics of what percent of our beef is locked or is not locked, but it's fair to assume with half of our basket.
Being beef that.
Our overall commodity lock has to be somewhat in line with what our beef is.
Tell you our outlook for beef has really not changed since the last time, we spoke to you. All we we do think it will drive the majority of our inflation for 2023 and that other items in the basket will see there is.
Inflation moderated to two to bring our overall inflation down.
On the last point you brought up about menu pricing that is still the way we think about it we price for the the structural components of inflation, which tends to be wage inflation, and we don't tend to overreact and price for the <unk>.
Cyclical items like commodities beef will probably be inflationary for a period of time, but like I said, we're feeling some offsetting deflation in other areas and we will.
We will focus first and foremost on the gas didn't.
Driving more people into the restaurant, but we will look at menu pricing again.
Later this year.
I would assume we will do something in that October period, like we have done in the past.
Thank you.
Your next question comes from David Tarantino with Baird. Your line is open.
Hi, good afternoon.
My question's related to the margin performance and I guess, when I step back and look at the strength in your traffic trends and your overall sales trends.
A little bit surprising that we're not seeing leverage on labor and I. Appreciate you have inflation, but I guess the question is what would it take to get leverage on the labor line.
Given the traffic increases that center.
AD hours.
Execution, So I guess, what what do we need to see to see leverage come to fruition on that line.
Yeah.
Thanks for the question David It's Michael.
Yeah.
Thank you.
We will need to see some of that wage inflation moderate I mean, the math, let's say if we have if we're guiding to 5% to 6% wage and other labor inflation, and we said well probably can be on the high end of that so if we have 6% for the year.
Our menu pricing is below that overall number then you need to see some certainly would need traffic, which helps to some extent, but with traffic comes the need for more staffing. So that's why.
We had said.
On our last call that first.
The first half of the year would not expect to be seeing leverage.
Leverage on that Labor line, and we'll see what happens in the back half of the year, we're still learning what that kind of algorithm will be of yield.
Do labor hours grow at 50% of traffic or to something else.
Happen there so.
So the thing so to learn there to determine what kind of <unk>.
Leverage you might be able to get but again seeing that wage pressure moderates.
We'll certainly be a big component that we would need to see.
Thank you.
Okay.
Your next question comes from Sara Senatore with Bank of America. Your line is open.
Thank you so much just a I guess a housekeeping question and then a follow up first on the housekeeping I know you mentioned 2.2 points of menu price I just wanted to make sure I was understanding what that amount year over year is that sort of in that 6% range in terms of the area of pricing as I try to think through.
Now that the margin compression in terms of inflation relative to price increases. So that's that's just as a housekeeping and then.
And I guess in terms of the components traffic seem to have accelerated pretty meaningfully and candidly you know I know, we might not be tacky map versus pre COVID-19 anymore.
Any sort of stack comparison are you seeing.
Any underlying change you know in in demand, whether it's different cohorts or the relative value proposition being stronger just try and answer it.
I understand again this very strong traffic number in the context of <unk>.
The environment with the caveat that I know multiyear comparisons very thanks.
Yeah. Thanks, Sara it's Michael first on your question about pricing I think what you're asking is what will pricing will look like by quarter.
For the second quarter, we will have five 6% pricing in the menu, but I will mention that given the timing of when pricing was taken last year and when it was taken this year. The five weeks that we have given you.
Same store sales number on had about six 2% pricing at <unk>.
Pricing in it in the last eight weeks of the quarter, we'll have about five 2% pricing in that and then that gets you to the five six for the full quarter and then Q3 will have five 1% pricing and before we take anything else in October we would only have two nine.
<unk> percent in the fourth quarter of 2023, so that's the cadence of pricing for the year as far as traffic Yeah, I think our traffic trends have been very very healthy and you'll continue.
You have to look very strong you know when you look at them on a.
Multi year basis, or a year over year basis, and I think that again goes to us.
We operate the business and making sure we are staffed to serve the demand that is out there and we are careful on those menu prices.
We are seeing a little bit of that negative mix in the entre category, which.
I believe is showing that some guests or maybe trading into us who were not casual dining guests on a regular basis before.
Coming in at some of our value value items, where I think we are continuing to gain new guests in this high cost environment and.
Our traffic trends are fueling the the benefit of that.
Thank you very much.
Your next question comes from Dennis Geiger with UBS. Your line is open.
Thank you I wanted to ask about full year expectations for restaurant margins, which I think last quarter. You said you could see the margin percentage improvement I think year over year, just curious any any update to that and then also if there's any update to those assumptions that you've got an internally maybe.
Labor, maybe it's at the upper end of the range. The range is sort of unchanged, though anything with ours any any any components of that that may.
That may have changed if youre able to just touch on the high level. Thank you.
Yeah, Hey, Dan This is Michael I really don't think much has.
Changed since we last spoke I do think the.
<unk>.
Some of it will depend where we are on those guide.
Guidance ranges that we talked about some of it will depend upon your assumptions for topline performance on traffic and you know what mix might look like but I do think we continue to have opportunity on.
From a margin percent wanted to see.
Some improvement I think.
You will see the most opportunity for year over year leverage on those margin percents.
In the back half of the year and probably the fourth quarter, having the most opportunity.
There for that but again some of that has to do with your personal decisions on on on top line growth and just like we said the well.
Last call I think the other operating is your biggest opportunity to see some leverage just as we saw that in Q1.
And again the cost of sales as we move through the year and see moderating levels of inflation and put that up against the pricing, we just talked about that.
Should start to see some some benefit in the back half of the year, but just the pure math would say youre going to see some some benefit on the cost of sales line.
Very helpful. Thanks, Michael.
Your next question comes from Jeff Farmer with Gordon Haskett. Your line is open.
You guys in recent quarters have reported seen little if any uptick in any type of promotional activity or discounting across the segment.
A couple of your peers have gotten a little bit more aggressive with with with promotions. Some TV advertising, but what are you seeing I know that broader casual dining is not exactly sort of head to head with steakhouse, but from your perspective, you're most relevant competitors have you seen it.
Rational behavior as it relates to promotions.
Yeah, I mean on their side, obviously, they're being pretty aggressive out there we don't technically get into that.
We are focused on our early dine communication within our local communities and a wild West Wednesday is one of those promotions that we do to to kind of give folks a little bit of a breakdown on that Wednesday, but those are really the two things that we focus on our early dine communication, we do a lot of that in our local store community.
We have our local store marketers that are out there working the communities and really just letting them know that we're present and we're available to serve them and here's what some discounting that we do and it's all been very consistent over the years with our early dine messaging and about 15 of our menu items that are discounted a little bit for that early side.
And then wild West Wednesday, but from a seasonal trend for us things that seem to be going pretty according to to normal from that standpoint.
Okay. Thank you.
Thank you.
Your next question comes from John <unk> with Citi. Your line is open.
Great. Thanks.
I guess I'll ask on the supply environment or real estate side of the business curious if youre seeing any sort of changes in the backdrop given some of the <unk>.
Noise that we're seeing.
Certainly in the lending environment in some of the regional banks.
Is that translating yet into perhaps any availability of sites that you might have.
Looked at previously and weren't available because of others coming in and now they're opening up.
Discussions with landlords and then the other follow up question I have is can you just tell us what that $2 $6 million charge was in G&A in the quarter.
Yeah, no problem, the real estate pipeline I think with all of that stuff happening recently.
It hasnt changed or affected us in any way at this time it depends on where it all goes but we're business as usual, we've got our processes on picking real estate or if somebody comes to us with a deal we'll definitely we're going to entertain any at all but we've got a pipeline for two and a half years deep on real estate that we're working at different levels all through.
All through the system.
The $2 six was a one time executive pay out.
Got it thank you.
Thank you John .
Your next question comes from Chris I'll call with Stifel. Your line is open.
Great. Thanks.
Just a point of clarification and then a question about Bubbas, Michael I apologize if I missed it but did you say why the company expects wage inflation to ease.
And then Jerry.
Wanted to ask about Bubbas future growth it looks like the volumes at newer locations are well below roadhouse and the investment I think it's been at least a half a million dollars higher than roadhouse. So on the surface. It would seem better to allocate all the capital to Roadhouse development. So I'd love to hear how youre assessing bubbas future potential.
How youre thinking about capital allocation above us.
Yeah, Hey, Chris Lee I'll I'll answer that first question on wages, and then hand it over to Jerry Yes, we do expect wage inflation to moderate again, a lot of the wage pressure that we're feeling this year has to do with.
Hiring people from last year are giving.
Raises last year that you'll have to flow through the system for 12 months. So there is that is a big component of the wage inflation Theres, obviously state mandated.
<unk> mandated increases that we took at the beginning of this year, but just the rate of increase that we're seeing.
As you know.
Has certainly slowed from what we were seeing last year, whereas it.
This pertains to your average wage rates so as we're moving further.
Into the lap of last year, we just expect that wage pressure to abate.
And then Chris on.
Bubba is growth.
In the last 18 months, we've made some leadership changes and adjustments to the strategy of how do we do that and we've really put the right people in place first and foremost and we are seeing the fruits of that labor and the in the new store openings and as we got our I think our very first one for the year will be opening in Avon here in a couple.
A weeks, but so we're excited about that you know.
Obviously, the roadhouse focus has been 20 to 25 a year, we know what we have there we've had a lot of success.
Consistent performance for over 30 years, and that's very exciting we are all in on Bubbas, We got great food. There, we've got a great energy and environment and ambiance that that really does fit with what we're trying to accomplish.
<unk> got some cost out of the building I think that will flow through eventually as some of the construction costs come down and we're holdings. We've done some things on our end to bring that down but wed like to get and it may take us. Another 24 to 36 months, but we will eventually get Bubba is growing at 10 plus and feel.
Good about the responsibility to to the investment there.
Thanks.
Thank you.
Your next question comes from Lauren Silberman with Credit Suisse. Your line is open.
Thank you. So I just wanted to ask about monthly comps they decelerated through the quarter. I think you said, 21% in January to $9. Three in March can you just help us unpack what you saw throughout the quarter and what might have been the driver of the step down is it just compares or anything else. Thank you.
Okay.
Yeah, Lauren it's Michael Yeah, I really do take a lot of it is.
Compares because again our sales while our sales volumes grew as we move through through the quarter and even into April . So obviously, the lapping of omicron early in January .
Cause that Youre outsize January percentage increase, but when I look at it on a multiyear basis.
<unk>, which also has noise in it you really don't see a slowdown in there. So again I do think it's the comparisons and.
Certainly we're not feeling like we are seeing a slowdown in the number of guests wanting to come to Texas Roadhouse.
Great. Thank you.
Your next question comes from Brian Vaccaro with Raymond James Your line is open.
Thanks, and good evening guys. Two quick ones for me just on G&A came in quite a bit higher than we were thinking could you help us put some guardrails on your annual expectations, there and how much should we pencil in for the GM conference in the second quarter.
Hey, Brian .
I can talk a little bit about the G&A.
Obviously again G&A.
Forming kind of how we described at the end of the last quarter, where this was a year, where we expected. The G&A dollars may grow at a faster rate than what revenue grows in and therefore, we may see as a percentage of revenues given a little bit back on G&A and that is what.
We saw in the first quarter, we would not have maybe seen that if we didn't have the one time cost in there.
Thank you exclude will come back to the conference here in a second I think the level of G&A youre seeing in the first quarter.
He is probably.
In the right ballpark of what you may you could potentially see.
As we move through the remainder of the year and with regards to conference, we're not going to get out into a specific number.
The conference but.
It will have it will be a little bit elevated as compared to the charges that we took in the second quarter of last year. So I would expect Q2 to be a little bit higher than Q1.
Alright, Thanks for that and then if I could just quickly circle back on the other Opex line, if my math right. It looks like cost per week up almost 10% year on year. Just are there any one timers worth highlighting in that line and if not could you elaborate on any new areas of pressure you might be seeing or.
And maybe an update on what Youre seeing in terms of utilities in R&M is there any light at the end of the tunnel that we might start to lap some of those and inflation could moderate thank you.
Yeah, Brian It's Michael again.
They're operating those that broken dollar for storage I believe we saw a slowdown in that U.
As compared to what it did in Q4 of last year versus the prior year and I think we may see have the potential to see some continued slowdown again this first quarter lapping.
Unusual in this hub of omicron from last year. So there was with the volumes that we were doing on the top line than you would expect to see some.
Larger growth in the other operating category.
I'm not seeing a ton of relief on many items at this point, but not seeing a big step up.
On items and that was kind of what we were expecting to happen. So utilities haven't started to move in our favor as of yet maybe that does happen as we move through the year.
Maybe we see some relief in some other areas, but right now again I think would be.
The leverage that we got on the other operating is coming because of the.
The traffic volumes that work that we've been able to generate in the overall <unk> that we have.
Alright, Thank you very much.
Okay.
Yes.
Your next question comes from Andrew Charles with Bank of Montreal. Your line is open.
Hey, good afternoon, thanks for taking the questions.
I was just hoping that you could maybe help us understand a little bit better what are you seeing the strong growth within the week or you spoke about maybe some of your earlier eating occasions is there anything that stands out and really driving that growth and then relatedly.
You see some small declines in the off premise on an average weekly sales basis do you think those folks are going back into dine in or I know you don't that those are kind of distinct customers, but curious if you think youre seeing that trade that you did on thanks.
Yeah, I'm, sorry, Andrew or Peter first part of the question real quick for me I apologize if you're still there yes sure yes, absolutely.
Where are you really seeing the growth is in peak week.
During the week as it earlier, yes, Sir.
Alright, I appreciate that Michael.
As I look at it we're seeing growth.
Seven days a week, we're seeing it early in the day, we are seeing it late at night, we're seeing it during our power hours, so really strong growth throughout all days of the week, maybe maybe it's a little bit stronger on the weekends.
On a percentage basis, but very pleased to see that it's coming across the board.
Which again, that's I think that's guests learning, where where there is opportunity to get into a Texas roadhouse and managing their schedules there as far as the.
Decline in to go yes, it's down a little bit on a percentage basis, but that is largely due to the increase in our our dining room visits in our dining room sales, we still get over $19000 per store week in to go sales in Q1, which was only down a few hundred dollars versus Q1 of <unk>.
Last year and probably some of those guests are now coming into into the dining room and dining with us It would not surprise me.
Be seeing them at.
Your next question comes from Andy Barish with Jefferies. Your line is open.
Hey, guys.
Just a couple of housekeeping and maybe.
Maybe an operational question.
Michael on the on the G&A Guide are you.
Including the 26261 timer I mean, obviously on an annualized basis that would be.
The additional $10 million or so for the Q&A.
I think you could probably take that out and then make it.
More in line again, well see what were the actual GE.
G&A comes in but.
Typically I think it's fair to assume if you strip that out then that would be the more comparable.
Number to use as you move through the year.
Yes, just wanted to make sure and then.
In April you don't have some of the volatility around calendar spring breaks and some of your markets that we've heard from others and how does.
Average weekly sales seasonality, usually progress from the $1 45 in April to May and June .
Yes.
There may have been some.
Seasonal movements from week to week and.
And those April numbers, but we still saw strength overall strength throughout the.
Throughout the month and so it is not.
That we were strong early on and things fell off or vice versa. So.
There were mismatches, but still.
Still kind of like we saw strength throughout.
Yes.
Typically now moving Yo Yo obviously April .
Tends to be a very strong month for us and them.
<unk> can be a strong months as well with mother's day.
June July August .
Even into September in those summer months.
We see the seasonality come in and maybe our volumes are a little bit lower than what you would see early in the year and then may begin to climb back up into the <unk>.
<unk> in winter months.
Very helpful and then.
Gary on the on the labor hour increases I am assuming that's both.
Back of House and Brian .
Are there some things.
You can look at in terms of I know the kind of the caveats that youre looking at anything equipment wise or changes in the back that.
May help as well.
Hey, How're you doing.
Yeah, I think we're looking at every component as to how to become more efficient. The number one thing is being fully staffed and.
Really holding on to our people and keeping that 10 years. So their productivity really increases and maybe you can use a less component on a prep or or that because of their efficiency. So we will continue to look at that is we've really ramped back up our staffing.
Our component is a heavy staffing we have made from scratch food Hall.
<unk> made obviously from that side of it we have a lot of commitment to legendary food and legendary service and and as the more experience that they get the more efficient and productive they can be and we should see that continue to pay dividends for us as we've invested heavily over the last couple of years to get to that level that we really want.
Be executing at a high level always and that is obviously driving our topline mentality in and the way we've been able to conduct business for a large portion of our.
Time.
In the business.
Thank you very much.
Thank you.
Your next question comes from Jim Sanderson with Northcoast Research Your line is open.
Hey, Thanks for the question I wanted to go back to the labor just to make sure I understand the incremental or the growth in labor hours reported in the first quarter is that a rate that will continue it's going to be a little bit higher than you would typically see as you get to a recovery phase relative to last year and Covid disruptions.
5%.
Yeah, Hey, Jeff. This is Michael I would I would say Q1 is is the anomaly with again one of the lapping of one micron and our staffing levels.
<unk> went through lowest in Q1 of last year specifically early.
In the quarter. So I think your biggest guests to our I'm, sorry labor hours growth.
It was in that Q1, but I'd also point out that four 8% traffic goes along with four 8% labor hour growth goes along with seven 6% traffic growth. So the ratio there is not that far off of what we.
Would try to get to in the past, but as we move through the year piece.
Piece of it will have to do with you know what.
What happens on the topline, but if traffic remains healthy we continue to grow I would expect you will continue to see some some labor hour growth not necessarily.
Right. If you think about how we talked about the business over the course of 2022 on the calls we would you say hey, our staffing has gotten better but there are still some pockets of opportunity and a quarter late or later, we'd say those pockets that becomes smaller so we still have to lap that this year with what we think are good.
Getting to be some very strong staffing levels, but the year over year comparisons will result in some labor hour growth again, assuming the business continues to move.
Right direction, but Q1 <unk>.
Should absolutely be the highest point for the year alright. Thank you for that and just a quick follow up question on pricing I think you've outlined how it looks to me is that pricing will be pretty much mid single digits until fourth quarter, how does that compare or stack up against your competitors in the <unk> segment, where casual dining is.
The gap with competitors similar is it narrowing just how you look at that.
Yes.
Just on that fourth quarter, we will look at pricing again, I would expect we do something in that October period, which would make that $2 nine maybe it will potentially be more in line with those other quarters, but we'll see what we do.
I would say that we think our pricing if you look at Knapp information I think our pricing.
It is below what others have done we've done what we felt is right for our business focusing on taking pricing to offset some of the structural inflation that we're feeling.
But but keeping the guests at top of mind, and making sure they still feel like they're getting a value when they're coming into Texas Roadhouse. So I would say that are our pricing actions have been below our competitors and some of the napped data would.
Would confirm that alright.
Alright, Thank you very much.
There are no further questions at this time I will now turn the call back over to Gerry Morgan.
Thank you very much I appreciate you all being with us and I just want to close and thinking all of roadie nation out there as we celebrated our 30 year anniversary and the tremendous success that we've had it's because of each and every one of you committed to legendary food and legendary service everyone have a great evening and thank you for your time.
Jim.
This concludes today's conference call you may now disconnect.
Okay.
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Yes.
Yeah.
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Okay.
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