Obamacare Complaints May Be Smokescreen for Other Problems
NEW YORK ( TheStreet -- Companies sounding the alarm about rising health care costs in the wake of President Barak Obama winning a second term in The White House may be more motivated by politics than facts.
Investors should also consider that the political complaints could be used to mask other, more important problems within the company.
Papa John's (PZZA) , for example, said it plans to reduce the hours of some employees in order to have more part-time workers than full-time workers. In a conference call with shareholders, CEO John Shnatter estimated the changes to health care laws could add as much as 20 cents to the cost of a pizza. Rather than raising prices, he's opting to penalize his employees.
Now speaking from the personal experience of having a pizza franchise in my family at one time (not Papa John's), you want more full-time stable employees rather than a roster of part-timers. It's a scheduling nightmare and they have less loyalty.
A quick review of where the costs are rising for Papa John's in its latest quarter tells another story. General and administrative costs have been affected by higher management incentive costs and expenses related to the company's operators conference. Salary costs rose because of higher bonuses paid to managers. Advertising costs were higher and the only cost that went down was cheese.
Medical device manufacturer Stryker (SYK) has also chafed at Obamacare. The company said it plans to close its New York facility and cut 96 jobs in December. Its response to the medical device tax is to slash 5% of its workforce, or 1,170 jobs. It blames the tax for all these changes.
Stryker, though, is also facing numerous lawsuits on hip products, patents, subpoenas from the Department of Justice and even its own shareholders. The company also recently had to recall its Neptune waste management product.
Stryker also chooses to ignore that, even before the health care mandate looked like it would live, that the third quarter of 2012 was the fourth consecutive quarter of slowing sales growth. Stryler is losing market share in Europe and has seen slower sales of capital equipment in the United States. However, blaming politics is much easier and diverts attention away from the real problems. Stryker is down 3% over the past three months, although it's still positive for the year, returning 6%.
Darden's Restaurant (DRI) , like Papa John's, is also threatening to cut workers hours so it won't have to provide health-care benefits for them. Darden's chains are sit-down restaurants as opposed to fast food like Papa John's.