Shake Shack Confirms Worst ‘Minimum-Wage-Hike’ Fears – “It’s Going Up Too Fast… We Can’t Catch Our Breath”

As we detailed earlier, Shake-Shack shares crashed to record lows after the fast-food restaurant as increased labor costs (thanks to Obama’s minimum-wage-hikes) crushed margins and caused menu price hikes that slowed demand…
Shack-level operating profit margins decreased 300 basis points to 25.2%, primarily due to increased labor and related expenses resulting from increases in hourly wages that were implemented at the end of fiscal 2016… Every market’s different, John, and every market is affected by rising minimum wage. A lot of our markets will soon see a $13, $14, $15 minimum wage. Our average wage across Shake Shack is about $13 right now, starting.
And worse, in its outlook, the company stated that “Same-Shack sales growth to be flat to prior year (vs. 2% to 3%), which includes approximately 1.5% to 2% of menu price increases taken at the end of December.“
This, as any rational economist knows – and we detailed in December 2015 before the socialist experiment in ‘fair-wages’ began, is exactly as was expected, and as The Wall Street Journal reports, Shake-Shack is not alone. A spate of high-profile New York City restaurants closing or increasing prices has raised concerns about the effects of higher minimum wages in one of the world’s most renowned food-and-drink cities.

This post was published at Zero Hedge on May 4, 2017.