Texas Roadhouse battles higher labor costs, gets break on tax bill
LOUISVILLE, Ky. (WDRB) – Texas Roadhouse’s net income rose nearly 18 percent in the second quarter, but it wasn’t because of stellar business performance.
Rather, the Louisville-based steakhouse chain reaped a $6.6 million reduction in income taxes, mostly because of the Republican-led tax reform package, in the April-to-June period.
Sales rose a healthy 5.7 percent at Texas Roadhouse's more-than 400 company-owned restaurants. Outback Steakhouse, by comparison, reported a 4 percent jump in sales during the April-June quarter, according to parent company Bloomin’ Brands.
But the profitability of Texas Roadhouse stores slipped because of higher wages, particularly in states like California and New York.
The company’s results fell short of Wall Street expectations, sending shares down about 5 percent in trading on Tuesday.
Texas Roadhouse executives told analysts on a conference call Monday evening that they will continue to resist wide-scale hikes in menu prices and instead focus on getting more customers through the doors of its steakhouses.
Kent Taylor, the chain’s founder and CEO, said the company hopes that absorbing higher labor costs will pay off in the long run.
“We also know that investments like those (in wages), along with our focus on keeping menu prices as low as we can, are the right thing to do for the long-term success of the business,” he told analysts on the call.
Taylor demurred when asked whether the company could do more to boost sales through non-traditional channels like loyalty programs, digital applications or by adding delivery -- as Bloomin’ Brands has at Outback locations.
“I think we kind of do it the old-fashioned way,” he said.