10-Q: Texas Roadhouse Reports Strong Q2 Growth Amid Inflation

Texas Roadhouse Inc. announced a 11.1% increase in total revenue for Q2 2026, driven by comparable sales growth and new store openings, despite facing commodity and labor inflation.

Summary

• Total revenue for the second quarter of 2026 (Q2 2026) increased by 11.1% to $1.68 billion compared to $1.51 billion in Q2 2025.
• Net income for Q2 2026 was $121.9 million, a slight decrease of 1.7% from $124.1 million in Q2 2025.
• Diluted earnings per share (EPS) decreased by 0.7% to $1.85 in Q2 2026 from $1.86 in Q2 2025.
• Restaurant margin dollars increased by 6.9% to $275.1 million, but as a percentage of sales, it decreased to 16.4% from 17.1% due to inflation.
• The company operated 832 restaurants as of June 30, 2026, an increase from 797 as of July 1, 2025, with 732 company-owned and 100 franchised.
• Capital expenditures for the first 26 weeks of 2026 were $178.8 million, with an expectation of approximately $400 million for the full year 2026.
• The company repurchased $42.6 million of its common stock in Q2 2026 and has $309.2 million remaining under its authorized stock repurchase program.

Sentiment

Score: 7

Explanation: StockSavvy.ai views this as a positive report, with solid revenue growth and strong operational performance, though margins are slightly pressured by inflation.

Positives

• Total revenue increased by 11.1% to $1.68 billion in Q2 2026, driven by comparable restaurant sales growth of 6.2% and a 5.0% increase in store weeks.
• Restaurant margin dollars grew by 6.9% to $275.1 million, indicating strong sales volume.
• The company continues to expand its footprint, with 832 restaurants in operation as of June 30, 2026, up from 797 in the prior year.
• Average unit volume for Texas Roadhouse restaurants increased to $2,380 thousand in Q2 2026 from $2,246 thousand in Q2 2025.
• Positive comparable restaurant sales growth of 6.2% for Texas Roadhouse restaurants in Q2 2026.
• The company maintained compliance with all financial covenants under its credit facility.

Negatives

• Net income decreased by 1.7% to $121.9 million in Q2 2026 compared to Q2 2025.
• Diluted EPS saw a slight decrease of 0.7% to $1.85 in Q2 2026.
• Restaurant margin as a percentage of sales declined to 16.4% from 17.1% due to commodity inflation (7.0%) and wage inflation (3.9%).
• Pre-opening expenses increased to $8.5 million from $5.5 million, reflecting an increased new store pipeline.
• General and administrative expenses as a percentage of revenue increased slightly to 4.3% from 4.2%.

Risks

• Commodity inflation, particularly for beef, is impacting food and beverage costs.
• Wage and other labor inflation continues to affect operating expenses.
• The company faces risks associated with its supply chain, as it relies on a few key beef suppliers.
• Potential for increased costs if suppliers are unable to fulfill obligations.
• The company is subject to various litigation arising in the ordinary course of business, though none are currently believed to be material.

Future Outlook

The company expects store week growth of 5% to 6% in 2026, including the benefit from franchise acquisitions. Capital expenditures for 2026 are expected to be approximately $400 million. The company anticipates an effective tax rate of approximately 14% for 2026.

Management Comments

• Comparable restaurant sales increased 6.2% and store weeks increased 5.0% at company restaurants in Q2 2026 compared to Q2 2025.
• The increase in comparable restaurant sales was due to an increase in guest traffic along with an increase in per person average check.
• The decrease in restaurant margin, as a percentage of restaurant and other sales, was primarily due to commodity inflation of 7.0% and wage and other labor inflation of 3.9% partially offset by higher sales.
• In 2026, we expect commodity inflation of approximately 5%, with prices locked for approximately 60% of our remaining forecasted costs.
• In 2026, we expect wage and other labor inflation of 3% to 4%.

Industry Context

StockSavvy.ai notes that Texas Roadhouse's performance aligns with broader trends in the casual dining sector, showing resilience in sales growth despite inflationary pressures impacting margins. The company's ability to grow its store base and maintain comparable sales growth indicates a strong brand presence and operational execution within a competitive industry.

Comparison to Industry Standards

• Texas Roadhouse's comparable restaurant sales growth of 6.2% in Q2 2026 exceeds the average growth reported by many casual dining peers, which have faced more significant challenges.
• The company's restaurant margin percentage of 16.4% is within the typical range for efficient casual dining operators, though the slight decline due to inflation is a common industry concern.
• Expansion strategies, including new store openings and franchise acquisitions, are consistent with industry growth models, though the pace of expansion can vary significantly by company.
• The company's focus on managing food and labor costs in the face of inflation is a critical benchmark for success in the current restaurant environment.

Legal Proceedings

• The company is a defendant in litigation arising in the ordinary course of business, including 'slip and fall' matters, employment related claims, dram shop statutes related to alcohol service, and claims from guests or employees alleging illness, injury or food quality, health, or operational concerns. None of these types of litigation are believed to have a material adverse effect on the business.

Related Party Transactions

• As of June 30, 2026, three franchise restaurants and one majority-owned company restaurant were partially owned by current officers. Revenue of $0.4 million and $0.8 million was recognized for these franchise restaurants in Q2 2026 and YTD 2026, respectively.
• As of July 1, 2025, five franchise restaurants and one majority-owned company restaurant were partially owned by current officers. Revenue of $0.7 million and $1.3 million was recognized for these franchise restaurants in Q2 2025 and YTD 2025, respectively.
• Acquisitions of five domestic franchise Texas Roadhouse restaurants during 2026 YTD included two where a current officer had a 2% ownership interest.

Stakeholder Impact

• Shareholders: Continued revenue growth and share repurchases are positive. Slight EPS decrease and margin pressure due to inflation may be a concern.
• Employees: Wage inflation is noted, but labor productivity and share-based compensation are also factors.
• Suppliers: Reliance on a few key beef suppliers presents a potential risk if their supply is disrupted.
• Creditors: The company maintains compliance with its credit facility covenants, indicating financial stability.

Next Steps

• Continue to monitor and manage commodity and labor inflation.
• Execute on the 2026 capital expenditure plan, including new restaurant openings.
• Utilize remaining authorization under the stock repurchase program.
• Continue to manage credit facility and maintain compliance with financial covenants.

Key Dates

Recommendation

The company demonstrates strong revenue growth and operational expansion, which are positive indicators. However, the slight decrease in net income and EPS, coupled with margin compression due to inflation, warrants a cautious approach. The ongoing share repurchase program and future growth prospects are balanced by the persistent inflationary pressures. Therefore, a 'hold' recommendation is appropriate pending further clarity on margin recovery and sustained earnings growth.

Keywords

Texas Roadhouse, Restaurant, Casual Dining, Financial Results, Q2 Earnings, Revenue Growth, Inflation, Commodity Costs