The inflationary pressures are partly driven by retail retail beef prices remaining high, with retail demand remaining strong despite higher prices.
Management noted that retail beef prices are not being used as loss leaders, and consumer willingness to pay high prices is contributing to sustained demand.
The company expects beef inflation to be a primary driver of overall commodity inflation, affecting margins and pricing strategies in the near term.
Effective tax rate for the quarter was 14.9%, with full year 2025 guidance updated to approximately 15%.
Food and beverage costs increased by 131 basis points to 34% of sales due to 5.2% commodity inflation and entree mix shifts.
G&A expenses grew 7.9% year-over-year, representing 4.2% of revenue.
Labor costs as a percentage of sales increased slightly by 6 basis points to 32.9%, with labor dollars per store week up 5.4%.
Other operating costs improved by 32 basis points to 14.5% of sales, driven by leverage on operator bonuses and insurance reserve changes.
Restaurant margin dollars per store week decreased 1% to over $28,500, with restaurant margin as a percentage of sales declining 108 basis points to 17.1%.
Same-store sales increased by 5.8%, supported by 4% traffic growth and a 1.8% increase in average check.
Texas Roadhouse reported a 12.7% revenue growth in Q2 2025, driven by a 5.3% increase in average weekly sales and 7.2% store week growth.
A $9.3 billion noncash impairment charge was recorded due to a sustained decline in stock price, reducing the carrying value of intangible assets.
Emerging markets grew top line by around 8% through both price and volume, with the highest operating income margin ever.
Inflation is expected to be about 5% to 7% for the year, with pricing increases around 1%, indicating pricing below inflation.
North America retail showed improvement excluding cold cuts and bacon, with a 2.7% decline in the latest 4-week period versus a 4% year-to-date decline.
Tariffs are expected to impact margins by approximately 100 basis points this year, with a potential full-year annualized impact of 180 basis points if tariffs remain.
The second quarter results came in line with expectations, showing an improvement in year-over-year top line performance.
Impact of Cocoa Price Fluctuations on 2026 Outlook and Pricing Strategy
Cocoa prices have recently dropped below GBP 5,000 per tonne, creating a potential upside for supply and demand in 2026.
Management expects a possible material upside if supply exceeds demand, with a low industry stock level indicating tight supply.
Cocoa butter prices have decreased significantly, with contracts now at roughly half of last year's ratios, offsetting recent cost increases.
Two scenarios for 2026: cocoa prices stay elevated, requiring additional pricing, or they decline, potentially leading to volume rebound and demand protection.
Aggressive Expansion and Market Entry Strategy in Texas and Sunbelt Markets
Portillo's plans to open 12 new restaurants in H2 2025, including in-line and airport formats.
Slow start of Texas restaurants due to industry-wide development and market saturation, with ongoing efforts to build awareness through marketing and grassroots initiatives.
Arizona and Florida markets performing better, with Arizona showing improved awareness and margins after initial openings.
Texas market's slower growth attributed to high competition and market saturation, with expectations of improvement as demand catches up.
Top 4 DMAs (Los Angeles, San Francisco, Houston, Phoenix) experienced outsized macroeconomic pressures in Q2, contributing to a 30 basis point reduction in system-wide same-restaurant sales.
Markets affected by macro pressures saw a significant downturn starting mid-June, punctuated by headlines and macroeconomic news.
Management remains optimistic that consumer sentiment volatility will moderate over time, which could stabilize sales.
Dafinchi
