Pub group JD Wetherspoon (LON:JDW) warned that annual profits may be lower than expected due to wage hikes, hitting its shares.
Wetherspoon said its operating margin in the 13 weeks to October 25 was 6.2%, compared with 7.7% in the same 13 weeks last year.
The lower margin was due to increases in the starting rates for hourly paid staff in October 2014 and August 2015, which totalled about 13%, Wetherspoon said.
Chairman Tim Martin said: "As we indicated in September, it is difficult to quantify exactly the factors which will influence our trading performance in the early stages of a financial year.
"Increased labour costs are clearly an important factor for all pub and restaurant companies and may result in our annual profits being slightly lower than the last financial year."
In the 13 weeks to October 25, like-for-like sales rose 2.4% and total sales increased 6.1%.
Sales were slightly higher in the last six weeks, which has coincided with the Rugby World Cup.
Wetherspoon has opened three pubs since the start of the financial year and has sold one. It plans to open about 15 pubs this financial year.
The company offered 20 leasehold pubs for sale and is now considering a small number of freehold disposals during the financial year.
It said it remained in a sound financial position, with net debt at the end of this financial year expected to be slightly above its July total of £601.1mln.
Shares fell 40.5p or 5.2% to 735.5p in late morning London trading.