Obamacare Complaints May Be Smokescreen for Other Problems

Editor's note: As part of our partnership with Nightly Business Report, TheStreet's Debra Borchardt will join NBR Monday (check local listings) as she questions whether companies that cry over the health care mandate are really covering up 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.

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) 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.

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