GKSR G&K Services - Class A (MM)

Uniforms to You, a division of Cintas Corporation (CTAS), has opened a new retail location at Elston Avenue. The new 8,500 square feet location offers more than 20,000 products and can be reached easily due to its proximity to both Kennedy Expressway and Clybourn Metra station. 

The assortment of products that are now showcased in the new store range from Cintas apparel for health care, security, foodservice, construction along with professional occupations. Apart from home brands, it also offers other branded apparel including Koi, IguanaMed, Dansko, Cherokee, Barco, Carhartt, Rocky, Wolverine, Boston Leather, Liberty, S&W, Elbeco and Van Heusen, in addition to other accessories.

Over and above the array of apparels and accessories, the new retail store at Chicago offers onsite services to satisfy customers’ demands for embroidery, custom patching and engraved name tags among others. These services are available on all the days.

Apart from this new store, Cintas has another retail store, Working Class, which is located in Oaklawn, Illinois.

The company’s earnings improved 41.5% year over year to 58 cents per share in third-quarter fiscal 2012, surpassing the Zacks Consensus Estimate of 52 cents. Total revenues increased 7.9% year over year to $1.012 billion, beating the Zacks Consensus Estimate of $1.008 billion.

Cintas continues with margin expansion through cost efficiencies despite headwinds from higher energy and material costs. During the quarter, gross margin increased 30 basis-points (bps) to 42.1% and the operating margin inflated 200 bps to 13.6%, marking the fifth consecutive quarter of operating margin growth. Cintas has scope for further margin expansion given the unutilized capacity in facilities that it can leverage.

Moreover, the company has a healthy balance sheet to finance future acquisitions. Its cash deployment strategy also supports acquisition.

However, low recycled paper prices still pose a problem for the company.  The recycled paper prices during the quarter remained as low as $150 per ton The company’s Document Management segment may face headwinds if paper prices remain low.

Cintas competes with companies like G&K Services Inc. (GKSR). It currently retains a short-term Zacks #3 Rank (Hold). We have a long-term Neutral recommendation on Cintas.

 

 
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