Tariffs, inflation, rising competition: Pressures pile up at Texas Roadhouse

Published Fri, Apr 25 20253:15 PM EDT

The odds are stacking up against Texas Roadhouse in its battle to keep diners coming through its doors. Earnings this week from consumer-facing companies PepsiCo , Procter & Gamble , and Chipotle provided a look at what's at stake. They showed a slowdown in consumer spending at a time of uncertainty about economic growth due to the upheaval from President Donald Trump 's trade polices. The numbers confirm the dismal outlook on the economy and inflation seen in recent consumer surveys from the University of Michigan and the Conference Board . Texas Roadhouse is a "mixed story" against that backdrop, Jim Cramer acknowledged during Wednesday's Morning Meeting. "But I think it can recover," he added. Since worried consumers tend to be more discerning, Texas Roadhouse aims to provide great value for cost-conscious diners, and that's what we like about it. According to research firm Technomic, Texas Roadhouse became the biggest casual dining chain last year with nearly $5.5 billion in U.S. sales in 2024. It took the title from Darden 's Olive Garden, which had held the top spot since 2018. Citi analysts suggest that 2025 might be a different story, saying Texas Roadhouse lacks catalysts that "could reverse the trend/interrupt the narratives of competitive pressures" from restaurants popular among Hispanics, such as Brinker -owned Chili's, which was third on Technomic's list with $4.5 billion in U.S. sales last year. Citi estimates that Hispanics make up 31% of Texas Roadhouse's core customers. As a result, Citi downgraded Texas Roadhouse to neutral from buy and cut its price target to $164 per share from $213. The analysts believe same-store sales have softened for reasons beyond weather, which is what Texas Roadhouse pointed to as the principal reason for slower foot traffic earlier this year on its fiscal 2024 fourth quarter earnings call in February. In addition to the namesake brand, the company and its franchisees also operate the smaller Bubba's 33 and Jaggers casual chains. On the tariffs side of the equation, Texas Roadhouse largely derives its revenue domestically, which provides some cover. However, any commodity inflation from tariffs would have an impact, Citi noted. Commodity inflation was a theme on Texas Roadhouse's February earnings call, when the company raised its 2025 inflation estimates to 3% to 4%, largely driven by beef prices due to tighter cattle supply. Executives did note, however, that they have secured fixed pricing for about 40% of their overall commodities basket for the full year, with more locked in for the first half of the year than the second. Earlier this month, analysts at BTIG said tariffs could make dining operators like Texas Roadhouse vulnerable to supply chain disruptions and product shortages. BTIG also cited the risks of rising costs of restaurant building materials. Texas Roadhouse has not offered any updates on expansion progress since February, when the company discussed its plans to continue opening around 30 new restaurants this year. The company has not responded to CNBC's requests for comment. TXRH 1Y mountain Texas Roadhouse 1 year We're not giving up on the stock just yet. We last purchased 30 shares of Texas Roadhouse on April 9 at around $153, taking advantage of the dip during the market's steep tariff-driven decline when our trust S & P Short Range Oscillator momentum gauge moved into historically oversold territory. While Jim still likes the company, he has stated on many occasions that it is a volatile stock. It closed at nearly $162 on Thursday, down from its 2025 high of $185 in March and its record-high close of $205 and change back in November 2024. With the release of fiscal 2025 first-quarter earnings still a couple of weeks away, we're not making any changes to our price target of $205 per share or our buy-equivalent 1 rating. For the Club, however, we feel we have an adequately sized position. (Jim Cramer's Charitable Trust is long TXRH. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust's portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

The Texas Roadhouse logo is seen on a sign outside of one its restaurants.

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The odds are stacking up against Texas Roadhouse in its battle to keep diners coming through its doors.