AutoZone says the federal government mandating a $15 per hour minimum wage would result in the company raising prices in order to offset the higher labor costs.
“You have to be able to price accordingly so that you don’t have the margin and profitability drags,” said Autozone CFO Jamere Jackson when asked about the impact of a mandated $15 per hour minimum wage.
The push for a $15 minimum wage has likely only just begun after Democrats earlier this year tried to include the measure in President Biden’s $1.9 trillion COVID-19 relief package before being rebuffed by Senate Parliamentarian Elizabeth MacDonough who ruled it needed to be considered as a standalone bill.
Biden, who backed the increase in his first joint address to Congress, last month signed an executive order mandating a $15 per hour minimum wage for federal contract work.
The federal minimum wage is currently $7.25 per hour, meaning a hike to $15 would more than double the hourly rate. States are allowed to set their own minimum wages.
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AutoZone this year saw its minimum wage in Seattle rise to $16.70 per hour and is currently figuring out a way to “manage through” the increase, Jackson said. A number of the company’s markets already have a minimum wage of $15 or higher.
A higher federal minimum wage would add to the pricing pressures the company is already experiencing.
CEO William Rhodes said AutoZone was beginning to see “pretty significant inflation” for certain products and that transportation costs were also increasing.
The company is “having to pass some of those costs along to our customers, just like we’ve done for the last 40 years,” he said.
AutoZone on Tuesday morning reported third-quarter same-store sales rose 28.9% year over year, boosted by the $1,400 stimulus checks that were sent to most Americans.
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The company earned $26.48 per share on revenue of $3.65 billion, exceeding the $20.14 and $3.26 billion that analysts surveyed by Refinitiv were anticipating.
AutoZone shares were up 22% this year through Monday, compared with the S&P 500’s 12% gain.
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