This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Obamacare Complaints May Be Smokescreen for Other Problems

Darden's Restaurant (DRI - Get Report), 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.

Darden recently reported its fiscal first-quarter rsults and food costs increased more than labor costs. In fact, labor costs and restaurant expenses as a percentage of sales actually fell in the fiscal first quarter of 2013 from last year. Darden has been working to restore revenue growth to its flagship Olive Garden chain. The turnaround is taking time and the chain may not show strong growth until fiscal 2015.

Its Red Lobster chain is struggling too. The chain's same-store sales have been erratic and quarterly sales in the most recent three-month period were lower than the same time last year.

A glut in lobsters has driven down the price of the ritzy crustacean. Still, Red Lobster has not been able to capitalize on that. The chain is running a Crab Fest, but lobster is still on the menu for $33. It's practically giving pasta away at Olive Garden, but charging customers a fortune for lobster. Maybe that's why customers are staying away - they see lobsters at their grocery store for $4.99 a pound, while the restaurant charges considerably more.

It makes a provocative headline to blame the election and the president for your company's problems. However, for each of these examples there are peers in the same sector that are now having the same issues with the mandate. Starbucks (SBUX - Get Report) is cutting back, but only on the management side -- not hourly workers. While Starbucks said last year that it wasn't too happy with the mandate, it hasn't acted on those complaints.

The medical device tax is being levied on an industry that sells $116 billion in products in the United States alone every year. The idea is that this money will lead to more people having insurance and then ultimately more people buying more medical devices. The margins tend to be 15-22% for the group, so a 2.3% tax doesn't seem onerous. This group is fighting for an appeal, but if a company has a good product and demand is high, 2.3% won't hurt it.

Investors need to look a little closer at the companies that howl over changes post-election. Is it truly the change or is it a good way to mask another problem the company is having?

-- Written by Debra Borchardt in New York.

>To contact the writer of this article, click here: Debra Borchardt.
Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.
2 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
DRI $72.10 1.99%
PZZA $76.07 -0.42%
SBUX $54.38 0.13%
SYK $96.90 0.95%
AAPL $125.69 -0.25%

Markets

DOW 17,776.91 +93.33 0.53%
S&P 500 2,081.34 +12.58 0.61%
NASDAQ 4,997.4590 +5.5190 0.11%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs