John Crudele

John Crudele

Business

Shutdown is the mother of all corporate excuses

It’s common to blame others for our failures.

And the government shutdown will be the mother of all excuses for any company that doesn’t live up to expectations in the months ahead.

Politicians will undoubtedly jump on this, too. If job growth remains weak, the president and every member of Congress will point to the shutdown. If only it hadn’t happened things would be great, they’ll lament.

City tax revenues down? It’s Washington’s fault.

Your garbage didn’t get picked up? Well, maybe that one’s on you if you didn’t put the can at the curb.

Hell, I’ve already blamed Washington three times for mistakes I’ve made. And I plan to use that excuse more often as we get further into the expensive holiday season.

But consider us the bush leagues; the major leaguers are corporate execs using Washington and Mother Nature (think Hurricane Sandy) to shift blame.

To prove the point, I’ve asked Thomson Reuters to monitor how many companies mention the government shutdown in presentations and press releases. This will be an ongoing project that Thomson Reuters will hopefully take off my hands when I get bored with it, which, I estimate, will be in a week.

Thomson Reuters monitors corporate earnings expectations so its computers are already kinda set up for this sort of thing.

As of the other day, 28 of the 500 companies represented in the S&P 500 index mentioned the shutdown one way or another. Some were asked about it by analysts; others brought it up on their own.

Some said it wouldn’t have an effect on them.

Others, though, weren’t so sanguine.

St. Jude Medical, for instance, said its manufacturing plant inspection process has been delayed because of the shutdown. McDonald’s said it would be hurt in areas where there are a lot of government workers.

Interpublic Group, the marketing advertising giant, said — sure — it had an impact. Costco said it was getting affected only in the Washington area.

Goldman Sachs said its clients were concerned, while Citigroup blamed weakness in its third-quarter results on the shutdown.

Family Dollar Stores, which sells stuff so cheap that shoplifters give them a miss, says it has had an impact.

The shutdown took place in October, which is the fourth quarter for most companies. So the use of the Washington excuse will pick up as we get later into the quarter.

There is something in corporate accounting called an “extraordinary item.” This has been a godsend for executives who want to make their earnings report too complicated for anyone to comprehend.

For instance, if a company is having a lousy quarter or year, its executives can sell or shut a business, or reorganize something. They can take a charge to earnings so that the real performance during the quarter is blurred.

Washington’s shutdown is not only the mother of all excuses but also the best extraordinary item any corporate executive could have hoped for.

The Labor Department is of two minds as far as the 800,000 furloughed government workers are concerned.

The next monthly employment survey won’t count the furloughed positions as lost jobs in the October report. Why? Because those furloughed employees have been promised back pay.

As far as the Labor Department is concerned, those jobs never went away. That’s in the Labor Department’s so-called Establishment Survey of company and government jobs.

But many of those 800,000 workers will be counted as unemployed in the Household Survey. That means the unemployment rate could rise (in the Household Survey) even though jobs won’t be lost — at least not because of the shutdown — in the Establishment Survey.

Got that?

The fourth-quarter earnings period is shaping up to be a very strange one.

According to my friends at Thomson Reuters, the 500 companies in the S&P still expect profits to be 10.2 percent higher than during the last three months of 2012. But they expect revenues to be only 0.8 percent higher.

That means one of two things: either companies are planning to prop up profits by cutting costs tremendously. Or executives are delusional as far as earnings are concerned.

I’m down with No. 2.

Have American workers become more diligent or just more frightened?

Staples, the company that sells, well, staples, reveals in its annual flu season survey that nearly 90 percent of office workers come to work even when they know they’re sick.

Last year, only 80 percent came to work sick and in 2011 the number was only 60 percent.

Either Americans are becoming more conscientious or they’re scared to death of angering their boss and losing their jobs. Maybe they’re trying to sicken colleagues who will choose to stay at home and lose their jobs.