Texas Roadhouse (NASDAQ: TXRH) reported Q1 EPS of $0.70, $0.12 worse than the analyst estimate of $0.82. Revenue for the quarter came in at $690.61 million versus the consensus estimate of $693.69 million.

Results for the first quarter included the following highlights:

Comparable restaurant sales increased 5.2% at company restaurants and 4.3% at domestic franchise restaurants;
Restaurant margin, as a percentage of restaurant and other sales, decreased 128 basis points to 17.9%, primarily due to labor costs which increased 118 basis points. Restaurant margin dollars increased 2.7% to $122.6 million from $119.4 million in the prior year;
Diluted earnings per share decreased 8.1% to $0.70 from $0.76 in the prior year primarily due to higher general and administrative expenses and higher depreciation and amortization expense, partially offset by higher restaurant margin dollars; and
Four Texas Roadhouse company restaurants were opened and two international franchise restaurants were opened.

Scott Colosi, President of Texas Roadhouse, Inc., commented, “Our top-line momentum continued this quarter highlighted by comparable restaurant sales growth of 5.2%. Despite our ongoing sales strength, our profits continue to be pressured by higher labor costs. Much of the labor increase was driven by wage rate and other labor inflation that currently does not show signs of abating. As a result, we are updating our labor inflation expectations for 2019. The additional 1.5% of pricing we put in place at the beginning of the second quarter will provide a significant benefit for the remainder of 2019. While we are certainly facing some challenges in our business right now, I have no doubt that our brand positioning is stronger than ever.”

Kent Taylor, Chief Executive Officer of Texas Roadhouse, Inc., commented, “I am proud of our operators who continue to be committed to actively protecting the guest experience and taking care of our employees in this very competitive labor market. We will continue to manage our business with a long-term view that includes growing average unit volumes from just over $5.0 million to $6.0 million in the coming years. We believe this approach, along with the strength of our operations and our legendary brand, well positions our business for long-term sales and profit growth.”

2019 Outlook

Comparable restaurant sales at company restaurants for the first four weeks of our second quarter of fiscal 2019 increased approximately 2.9% compared to the prior year period.

Management updated the following expectation for 2019:

• Approximately 7.0% to 8.0% growth in total labor dollars per store week.

Management reiterated the following expectations for 2019:

• Positive comparable restaurant sales growth including a menu price increase of approximately 1.5% implemented at the beginning of the second quarter;
• 25 to 30 company restaurant openings, including as many as four Bubba’s 33 restaurants;
• Commodity cost inflation of approximately 1.0% to 2.0%;
• An income tax rate of approximately 15.0%; and
• Total capital expenditures of approximately $210 million to $220 million.

For earnings history and earnings-related data on Texas Roadhouse (TXRH) click here.