Have you ever savored a juicy steak at a lively restaurant, only to wonder how the place keeps its prices so reasonable despite soaring food costs? That’s the puzzle Texas Roadhouse is wrestling with right now. The beloved steakhouse chain, known for its hearty meals and rollicking atmosphere, recently dropped its second-quarter results, and let me tell you, it’s a mixed bag that’s got investors scratching their heads. Strong sales? Check. Profit hiccups? You bet. Let’s dive into what’s cooking at Texas Roadhouse and why this stock is such a conundrum.
A Steakhouse Facing Big Challenges
The casual dining scene is a tough one to crack. You’ve got to nail the vibe, keep the food top-notch, and somehow make the math work when ingredient costs are climbing faster than a line dance at happy hour. Texas Roadhouse has long been a standout in this space, serving up affordable steaks in a fun, family-friendly setting. But their latest earnings report shows they’re walking a tightrope between strong customer demand and some serious cost pressures. Let’s break it down.
Solid Sales, Shaky Profits
In the quarter ending July 1, Texas Roadhouse pulled in $1.51 billion in revenue, a solid 12.8% jump from the previous year. That’s no small feat, especially when you consider the economic headwinds buffeting the restaurant industry. Wall Street was expecting $1.50 billion, so the chain edged out those predictions. But here’s the kicker: earnings per share (EPS) came in at $1.86, up 4% year-over-year but falling short of the $1.91 analysts had hoped for. Why the miss? Two words: beef inflation.
Beef prices have been on a tear, and for a steakhouse, that’s like trying to run a marathon with a backpack full of bricks. Despite the revenue win, those higher costs ate into profits, leaving investors with a bittersweet taste. The stock dipped about 1% in after-hours trading, and it’s been sliding—down 7.4% from its May peak. So, what’s keeping customers coming through the doors despite these challenges?
Why Customers Keep Coming Back
One of Texas Roadhouse’s superpowers is its ability to pack tables even when wallets are tight. The chain reported a 5.8% increase in comparable sales—a fancy term for sales growth at existing locations—beating Wall Street’s 5.3% estimate. This wasn’t just people spending more; it was customer traffic driving the bus, with a 4% uptick in foot traffic and a 1.8% bump in average check size.
Customers are flocking to Texas Roadhouse for its unbeatable value and lively atmosphere.
– Restaurant industry analyst
Breaking it down by month, April saw a 4.3% comps increase, May jumped to 7.2%, and June settled at 5.8%. Even better, the third quarter started strong, with comps up 5.3% in the first five weeks, despite a slight drag from the Fourth of July calendar shift. Clearly, people love their ribs and rolls, and Texas Roadhouse is delivering on the experience. But can they keep this momentum going?
The Beef Price Problem
Here’s where things get tricky. Beef inflation is the elephant in the room—or rather, the cow in the kitchen. Cattle supplies in the U.S. are tight, pushing prices to record highs. On the day of the earnings report, cattle futures hit a new peak on the Chicago Mercantile Exchange. For a chain built on serving up sizzling steaks, this is a major headache. Management noted that commodity costs are now expected to rise 5% in 2025, up from their earlier 4% estimate. Ouch.
To offset this, Texas Roadhouse is pulling a few levers. They’re planning a 1.7% menu price hike in the fourth quarter, which CEO Jerry Morgan called “the right level” to balance value and cost pressures. They’re also seeing some relief on the labor front, with wage inflation now projected at 4%, down from a 4-5% range. But let’s be real—raising prices too much risks alienating the budget-conscious diners who make Texas Roadhouse their go-to spot. It’s a delicate dance.
What’s on the Menu for Growth?
Despite the profit squeeze, Texas Roadhouse isn’t sitting still. The company is doubling down on expansion, opening four company-owned restaurants in Q2, including two locations of their sports-bar concept, Bubba’s 33. They’re on track to launch about 30 new spots this year, with plans to ramp up even more in 2026. Growth isn’t just about new stores, though—they’re also snapping up franchise locations to bring more control and consistency under the corporate umbrella.
- Acquired three franchise restaurants in Q2, bringing the 2025 total to 17.
- Plans to buy eight more domestic franchises, including all five remaining in California.
- Franchise acquisitions boost operational control and often improve profits.
These moves make sense. Owning more stores means Texas Roadhouse can fine-tune everything from menu offerings to staff training, which usually translates to better margins over time. Plus, their Bubba’s 33 concept, with 52 locations and counting, is a sneaky growth driver that diversifies their portfolio. I’m a fan of this strategy—it’s like planting seeds for a bigger harvest down the road.
Navigating Consumer Trends
One thing that struck me in the earnings call was how Texas Roadhouse is adapting to shifting diner habits. For instance, alcohol sales are down, reflecting a broader trend of people cutting back on drinks when eating out. To counter this, the chain rolled out mocktails—nonalcoholic cocktails that keep the vibe fun without the booze. Smart move. They also noticed customers trading up to bigger steaks or choosing steak over chicken, which boosts the average check but puts even more pressure on beef costs.
Mocktails are a clever way to keep the menu fresh and appeal to changing tastes.
– Food industry observer
It’s little tweaks like these that show Texas Roadhouse gets it. They’re not just slinging steaks; they’re reading the room and adjusting to what customers want. But with diners potentially getting pickier in the second half of the year, will the chain’s value proposition hold up?
The Investment Angle: Hold or Buy?
Here’s where I get a bit torn, and I suspect many investors feel the same. On one hand, Texas Roadhouse is firing on all cylinders when it comes to customer traffic and brand appeal. Their comps are strong, their expansion plans are solid, and their franchise buybacks are a savvy use of cash. But those pesky beef prices are a real drag, capping the kind of profit growth that could send the stock soaring.
| Metric | Q2 2025 Performance | Outlook |
| Revenue | $1.51 billion (+12.8%) | Positive comp sales growth |
| EPS | $1.86 (+4%) | Pressure from commodity costs |
| Comparable Sales | +5.8% | +5.3% (early Q3) |
| Commodity Inflation | 5% (projected) | Up from 4% estimate |
Right now, the stock feels like it’s in a holding pattern. The fundamentals are strong, but the commodity headwinds make it tough to justify jumping in at current prices. My take? Wait for a dip. If beef prices cool off or the stock pulls back to a more attractive entry point, it could be a great time to pounce. For now, though, a hold rating feels right.
What’s Next for Texas Roadhouse?
Looking ahead, Texas Roadhouse has a lot going for it. Their 2025 guidance reaffirmed positive comp sales growth, $400 million in capital expenditures, and 5% store week growth—a metric that captures new openings and franchise acquisitions. The lower tax rate (now 15%) is a nice bonus, and labor cost relief helps too. But the 5% commodity inflation projection is a cloud hanging over the outlook.
- Keep an eye on beef prices—any relief could unlock profit growth.
- Watch for expansion updates, especially Bubba’s 33 growth.
- Monitor consumer spending trends for signs of slowdown.
Perhaps the most interesting aspect is how Texas Roadhouse balances its value proposition with rising costs. They’ve built a brand that screams “great food, great price,” and that’s not easy to maintain when your main ingredient is getting pricier by the day. Yet, their ability to keep customers coming back—rain or shine, inflation or not—says something about their staying power.
So, what’s the verdict? Texas Roadhouse is a solid player in a tough industry, delivering value that keeps diners happy and tables full. But until beef prices ease up, the stock might not break out like we’d hope. If you’re an investor, keep this one on your radar, but don’t rush in just yet. And if you’re a diner, well, those fresh-baked rolls aren’t going anywhere. What do you think—can Texas Roadhouse ride out this storm and come out stronger? Let’s keep watching.
