Pub chain JD Wetherspoon (LON:JDW) warned that annual profit was unlikely to top last year's, taking the fizz out of its shares.
Wetherspoon said like-for-like sales increased by 2.9% and total sales rose 6.5% in the 11 weeks to July 12.
In the year to date, like-for-like sales increased 3.4% and total sales lifted 7.6%.
But the operating margin in the 11 weeks to July 12 was 7%, compared with 8.3% at the same time last year.
Wetherspoon said the full-year operating margin is expected to be around 7.4%. "As previously indicated, full-year profit before tax is unlikely to be higher than last year," it said.
Chairman Tim Martin criticised the Government's decision to increase the minimum wage as part of a so-called 'living wage', saying it would hike pub running costs.
He said the company had already increased starting pay last October and had agreed an 8% rise from August this year.
"This disadvantage is compounded by a huge VAT and business rates disparity between pubs and supermarkets, which is putting unsustainable pressure on many pubs in our industry, especially in smaller towns and less-affluent areas," Martin said.
"Pubs contribute around 40% of sales as taxes of one kind or another and are important generators of jobs.
"Capricious initiatives by the government, widening the financial disparity between pubs and supermarkets, will threaten the future of many more pubs."
Shares in Wetherspoon dropped 58p to 713p.
Shore Capital, which has a 'hold' recommendation on the stock, said the update was unsurprising, but added: "We expect to be reducing our 2016 forecasts."
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