Job cuts leave uniform providers with anemic biz

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Bangalore, June 4: : US workers are not the only ones feeling the pinch of the economic downturn. As more and more of them are forced to hand in their uniforms, companies that supply workplace-clothing are grappling with anemic business.

As a potent cocktail of the US housing market slump, credit crunch and rising costs pulls down the US economy and forces companies to shed jobs, worker-uniform suppliers Cintas and G&K Services have seen their market value shrink.

The US economy lost jobs for the fourth month in a row in April. Since 2008 began, some 321,000 jobs have been lost from payrolls.

Most of the pain for the uniform providers stems from job losses in sectors like manufacturing and construction, where a large number of workers don uniforms.

The Labor Department said a net 20,000 jobs were shed in April. The manufacturing sector lost 46,000 jobs, while the construction sector lost 61,000.

"What the data definitely tells us is that the material job losses... are not a good thing for companies like Cintas, G&K Services or UniFirst," Ashwin Shirvaikar, an analyst at Citigroup Global Markets, said.

In March, Cintas, which provides workplace uniforms, cut its full-year earnings forecast, citing tough economic conditions, and promised aggressive cost controls.

Cincinnati-based Cintas, whose stock has fallen 29 percent over the past year, is the largest US uniform supplier. It gets the bulk of its revenue from renting uniforms and ancillary products like entrance mats and restroom supplies.

G&K Services, UniFirst and privately held Aramark complete the roster of major players that control 60 percent of the estimated $16 billion uniform-rental and related-services market.

In April, Minnetonka, Minnesota-based G&K Services, whose sales depend heavily on uniform rentals, posted a 12 percent drop in quarterly profit and forecast fourth-quarter results below market estimates. Its stock has lost 10 percent over the past year.

"G&K Services will continue to have a lower revenue growth rate due to the current economic environment, which will be reflected in the quarters to come," Needham & Co analyst Theodor Kundtz said.

Rival UniFirst's focus on providing higher-margin laundry services helped it skirt the blow from sluggish uniform rental trends and post a more than two-fold jump in second-quarter profit.

In sharp contrast to Cintas and G&K, UniFirst, which also decontaminates and cleans garments that have been exposed to radioactive materials, saw its market value jump 9 percent over the past 52 weeks.

But UniFirst's director of marketing, Robert Isaacson, was cautious about the future. "With so many industries feeling the pinch of today's economy, some of our customers are downsizing and some may even be closing their doors."

TACKLING THE TURMOIL

In order to tide over the crisis, Cintas spokeswoman Heather Trainer said the company was looking at reducing costs by consolidating operations, limiting expenses and exploring opportunities with more cost-efficient suppliers.

The company has also introduced more retail-inspired garments such as cargo pants, a high-end polo shirt and executive wear.

Cintas also provides first-aid and safety products and services, including first-aid cabinets, safety glasses and gas detectors to companies like Wal-Mart Stores Inc and McDonald's Corp

Barrington Research analyst Alexander Peter Paris said G&K Services has introduced a line of uniform for the food industry designed to prevent food contamination.

Apart from providing branded apparel, G&K Services also provides the food industry with aprons, towels, butcher wraps, hats and wait staff apparel.

END IN SIGHT

Analysts do not believe the pain of job losses will last long.

"It is our economic forecast that the current economic conditions will not be long lasting. We expect some recovery from the second half of this fiscal year," Barrington's Paris said.

Until then, the healthcare sector, though not a traditional focus for Cintas, UniFirst and G&K, could provide a breather to the firms.

In April, when the manufacturing and construction sector saw a sharp decline, the healthcare sector saw an increase in jobs by about 37,000.

UniFirst, whose customers include oil major BP, supermarket operator Safeway and cable TV firm Comcast, said it had recently expanded its line of healthcare and also introduced specific apparel for patients. Cintas confirmed the healthcare sector was an area for future growth.