Some Texas Roadhouse restaurants can operate at near-full capacity despite COVID-19

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Texas Roadhouse Inc. shares closed up 4.1% on Tuesday after the casual dining chain reported a steady increase in comparable sales during the second-quarter late Monday, aided by its ability to serve more dine-in customers. Net losses totaled $33.6 million, or 48 cents per share, after net income of $44.8 million, or 63 cents per share, last year. Revenue of $476.4 million fell from $689.8 million last year. The FactSet consensus was for a loss of 62 cents per share and revenue of $477.0 million. Comparable sales were down 32.8% for the quarter, rising from April (down 46.7%) through June (down 14.1%). “Those limited capacity restaurants for July were down 11.2% and we’ve got a pretty fair mix of 100% capacity restaurants, 75%, 50% down to 25%,” said Tonya Robinson, chief financial officer for Texas Roadhouse on the call, according to a FactSet transcript. Whether the capacity is far reduced or at 100%, Robinson also said the company’s to-go business “holds pretty well across the board.” The highest number of restaurants, 332, are operating at 50% capacity, while 115 are operating at 100% capacity. Sixty-eight are at a quarter of capacity and 27 are at 75%. “The chain is benefiting from its booth-style seating and widespread partition installation (now in every restaurant), which can allow operating at nearly full capacity in certain jurisdictions,” writes Stifel analysts. “Furthermore, the company has erected temporary patios to further bolster capacity levels where possible.” Stifel rates Texas Roadhouse shares hold with a $58 price target. “We estimate the company is retaining about two-thirds of its off-premise sales as dining rooms reopen, a sizable figure that suggests these sales could prove stickier than expected even as restaurants reopen,” wrote RBC Capital Markets, which rates Texas Roadhouse shares buy with a $78 price target. Texas Roadhouse stock has rallied 6% for the year to date, and is up nearly 29% over the last three months. The S&P 500 index is up 2.3% for the period.
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