What analysts are saying: St. Jude layoffs linked to tax?

Updated: September 1, 2012 - 4:51 PM

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St. Jude Medical Inc. said Thursday it will lay off 300 workers in a reorganization designed to cut $50 million to $60 million in expenses starting next year.

"This is another piece of fallout that we can attribute at least in large part to the medical device tax," Thomas Gunderson, senior analyst at Minneapolis-based Piper Jaffray & Co., told Bloomberg News. "From a shareholder standpoint and Wall Street standpoint, it's always good to cut expenses."

Medical device makers will have to pay a 2.3 percent excise tax on products starting next year. The levy was designed to raise $2 billion a year to expand coverage of the uninsured as part of the 2010 health care reform law. In July, St. Jude said that its 2012 outlook was worsening as last year's recall of Riata, a defibrillator wire, had hampered sales of other products.

SHOPPERS TOUGHING IT OUT

Retailers reported stronger-than-expected sales for August, up 5.9 percent from the year-ago period. Good weather and aggressive back-to-school promotions translated into a surprising amount of consumer spending.

Nearly all of the 18 major retailers that reported August sales, including Minneapolis-based Target Corp., beat Wall Street expectations. Target's same-store sales rose 4.2 percent, compared to the 3.1 percent that was expected. The strong showing impressed analysts.

"Despite a lot of challenging macroeconomic fundamentals, the American consumer finds these opportunities where they just pick themselves up and they go out and shop, and that's what we saw" in August, said Chris Donnelly, a retail specialist with Accenture. "Most retailers are beating the estimates and most of their estimates were ambitious."

JOHN J. OSLUND

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What analysts are saying: St. Jude layoffs linked to tax?

SHOPPERS TOUGHING IT OUT

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