Shares of Texas Roadhouse (TXRH - Get Report) hit the skids Tuesday, tumbling 11% to $54.35, after increased labor costs caused the restaurant chain to miss Wall Street's first-quarter earnings and sales expectations.
The Louisville, Kentucky-based company said earnings came to $50 million, or 70 cents a share, down from 76 cents a share a year ago and missed analysts' forecasts of 82 cents a share. Revenue totaled $691 million, up from from $628 million a year ago, but short of Wall Street's projection of $694 million.
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%, the company said, primarily due to labor costs which increased 118 basis points.
"Despite our ongoing sales strength, our profits continue to be pressured by higher labor costs," President Scott Colosi said in a statement. "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."
For 2019, Texas Roadhouse said it expects about 7% to 8% growth in total labor dollars per store week.