Why Texas Roadhouse, Inc. Stock Got Slaughtered Today

By Jeremy BowmanMarketsFool.com

What happened

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Shares ofTexas Roadhouse, Inc.(NASDAQ: TXRH) were getting chopped today after the steakhouse chain turned in a disappointing fourth-quarter earnings report. As of 12:11 p.m. EST, the stock was down 13.9%.

So what

The fast-growing restaurant chain seemed to get hit by the "restaurant recession," as comparable sales growth at company-operated locations slowed to just 1.2%, and profits surprisingly fell.

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Image source: Texas Roadhouse Twitter account.

Overall revenue was up 7%, to $484.7 million, below expectations of $496.6 million, while earnings per share fell from $0.32 a year ago to $0.29, well behind the consensus at $0.37. Management blamed the decline in profits on higher labor, SG&A (selling, general, and administrative expenses), and depreciation costs.

In the press release, CEO Kent Taylor noted the strong performance for the full year as earnings per share were up 19% in 2016, but did not address the weakness in the closing period.

Separately, the company also raised its quarterly dividend 10.5%, to $0.21, good enough for a yield of 2% at current prices.

Now what

Looking ahead, the company's outlook for the current year was similarly underwhelming, as it said in its press release that comparable sales were up 1.5% through the first 55 days of the year, and its guidance called only for "positive" comparable sales growth in 2017.

Management also sees labor inflation in the mid-single digits, which will likely pressure profit growth as it did in the fourth quarter. Texas Roadhouse plans to open another 30 company-owned locations in the year, growing the store base by about 7%. While profit growth may be sluggish this year, the long-term story still seems intact as the company opens new stores and has proven the popularity of its concept.

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Jeremy Bowman has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Texas Roadhouse. The Motley Fool has a disclosure policy.