Uniform Indicators Show No Employment Recovery (CTAS)

Many investors use companies such as Cintas Corp. (NASDAQ: CTAS) as a bogey of the economy, particularly for the employment sector.  There is a simple reason here: it provides corporate uniforms and related business services.  It is a direct tell on what is going on in the employment sector at major services and manufacturing companies where employees wear uniforms.  The earnings warning that Cintas gave this morning is not indicative of anything like a recovery coming yet in employment trends.

Cintas guided earnings to $0.34 to $0.37 EPS and put revenues in a range of $870 million to $885 million.  Thomson Reuters has estimates higher at $0.47 EPS and about $923.2 million in revenues.

The company noted how the economy continues to lose employment at a rapid rate.  For obvious reasons, this is directly impacting customers and prospects for new customers. The company even noted the “suddenness and severity” in U.S. job losses in recent months.

Cintas is taking cost cutting measures of its own as it is uncertain when and at what rate any real economic recovery is coming.  The company plans taking a $50 million charge due to severance charges for workers and due to higher inventory adjustments.

Shares are indicated lower by more than 10% with early indications down around $21 to $22 in early trading; the 52-week trading range is $18.09 to $33.73.

Jon C. Ogg
May 29, 2009