Rewind I: Wage Increases Squeeze Profits

Buffalo Wild Wings & Hersha Hospitality Trust Shine a Light on Jobs

When Toys R Us filed for bankruptcy a few weeks ago, we noted that part of its business plan - which, of course, gave JP Morgan ($JPM) and other DIP lenders comfort that the business is viable - included minimum wage increases to compete with Walmart ($WMT). Notably, Walmart subsequently had the opportunity to raise wages again and opted not to. Back in the beginning of the distressed dining wave, we highlighted, prior to the election, that minimum wage increases were increasingly cited as one of the causes for bankruptcy. Notably, in this week's onslaught of earnings reports, a number of firms - from the very successful Buffalo Wild Wings ($BWLD) to the not-so-much Hersha Hospitality Trust ($HT) - noted that wage increases were squeezing profits. We snarked on Twitter that BWLD's "Fiscal Fitness" program must be the new euphemism for "More Work, Fewer Hours" as the company announced hour curtailments to offset wage rate increases. The Philips Curve is finally kicking in, it seems. Maybe that has something to do with 3% GDP growth.