Operating a restaurant is tough business. There are literally thousands of national chains and local mom and pop locations competing for dining out dollars. Concepts that resonate with consumers can stay relevant for many years, especially if the stores are new and if the concept is in its early stages. A few operators, such as the one that operates Red Lobster and Olive Garden, have found ways to stay relevant for many decades. Others simply have the advantage of less market penetration and the ability to open new stores where consumers are most likely to find them. Texas Roadhouse (Nasdaq:TXRH) is one such new concept, and has been expanding its casual dining concept across the world at a fairly decent clip in recent years.

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Recent Results and Outlook
Texas Roadhouse's second quarter sales jumped 15% to $320.3 million. This consisted of solid same store sales of 4.5% and the opening of seven new restaurants. Reported net income advanced 26% to $20.3 million or 28 cents per diluted share and was 28% when including the benefit of share buybacks. Restaurant margins improved due to cost controls and sales leverage.

For the full year, analysts are currently calling for total sales growth of 14% and total sales of nearly $1.3 billion. The average profit projection is 97 cents per share. For 2013, sales growth is expected to be nearly as strong at 13.3%, sales should come in above $1.4 billion and profits could advance 15.5% to $1.12 per share. Texas Roadhouse detailed that it plans to open about 25 new restaurants and sees comparable store sales growth between 4 and 4.5%, which is at the low end of previous guidance.

Management didn't appear to have any major concern that European sovereign debt woes would derail its domestic expansion prospects. It may slow down overseas ambitions, but for the time being it appears that the company has plenty of growth opportunities. Using the latest downturn as an example, total sales still moved steadily forward, due in good part to new store openings. Profits also continued to move steadily forward.

SEE: Earnings Forecasts: A Primer

The Bottom Line
Texas Roadhouse has been a model of consistency in recent years. Over the past five annual periods, average sales growth has been 13.2% and profits have advanced an even stronger 14.9% over this same period. Top-line growth has slowed to around 8% over the past three years, but profit growth has improved to more than 19% annually.

Expansion potential remains wide open. Texas Roadhouse recently had 380 locations in the United States and one foreign country. This is well below the more than 1,500 stores that Brinker International (NYSE:EAT) operates under its Chili's brand, 1,800 locations that DineEquity (NYSE:DIN) operates under its Applebee's umbrella and more than 2,000 sites that Darden Restaurants (NYSE:DRI) runs and includes Olive Garden, Red Lobster and Longhorn Steakhouses.

Texas Roadhouse, along with Buffalo Wild Wings (Nasdaq:BWLD), is among the fastest growing restaurant concepts. Both have a longstanding reputation for quality food and keeping patrons coming back through the doors. Texas Roadhouse has proven it can remain profitable during a severe recession and is also able to finance new restaurant growth with funds it generates from existing ones. This could also serve it well should the economy head south again. For the coming year, it expects to spend $90 million in capital expenditure to maintain existing stores and open new ones.

SEE: 8 Tips For Stretching Your Dining-Out Dollars

At the time of writing Ryan C. Fuhrmann was long in shares of Darden but did not own shares in any other company mentioned in this article.

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