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$9.40 0.22 (2.40%)
9/5/2008 4:00 PM

Texas Roadhouse, Inc. (TXRH)

CAPS Rating:
**

The Company is a full-service, casual dining restaurant chain. It offers an assortment of specially seasoned and aged steaks hand-cut daily on the premises and cooked to order over open gas-fired grills.

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Avatar Tastylunch (98.83) Submitted: 6/16/08 10:30 PM : Underperform Start Price: $9.45 TXRH Score: -8.60

I'm not a fan of restaurants in this consumer environment (high gas, high food, foreclosed homes).

Texas Roadhouse's main focus is steaks. Right now beef isn't experiencing a whole lot of inflation but that's going to change. In mere months the higher feed prices we have now are going to translate into higher meat prices (by virtue of the expensive being ingested)

People are not going to want newly expensive steaks when everything else costs so much. The latest consumer confidence numbers are
simply dreadful.

In about a month the minimum wage hike will kick in too, further pressuring margins.

Texas Roadhouse is pretty well managed but I don't think that's going to matter. Increased same store profits are going to be tough to achieve, in fact TXRH is expecting same store sales to be flat. I think they will likely be slightly negative despite their best efforts. Furthermore their 2008 forecast is wide (5-15% gain) setting up the potential for disappointment, I think their new restaurants will likely struggle.

The stock could easily lose another 10% form current levels.

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