October 12, 2007
Still Dressed for Success
Demand for uniforms in the American workplace is on the rise. Already 26 million employees wear some sort of uniform to work to distinguish themselves and the companies they work for. These include waiters, hotel staff, drivers, mechanics, and grocery store clerks. A million new uniform wearers are added each year.
The $16 billion a year uniform rental industry is dominated by an oligopoly, three publicly traded companies: Cintas, G&K Services, and Unifirst. The concentration ration of these three, along with privately held Aramark, control 60% of the business. Most uniform rentals and laundry services are contracted in five year increments with 90% of contracts renewed. The profits come from uniform rental and servicing, of course, but these smart companies have expanded into other route based services. For example, hotels need not only uniforms, but door and floor mats, fire extinguishers, first-aid supplies, and in this age of heightened security, document shredders. About half their new customers come from those who weren’t uniform users in the first place. By offering additional services to their customers, these companies have increased demand, attracted new buyers, and made themselves indispensable to the everyday business of running a business.
The uniform industry leader is Cintas, with $3.7 billion in revenue this year. Their revenue has grown 9% over last year, even with the downturn in the auto industry and other industrial sector employment. Cintas predicts a 4% growth this coming year. Uniform rentals alone brought in 74% of revenue this year. UPS, Hershey and Ford are its biggest customers. Cintas has had 38 consecutive years of revenue and profit growth, pays a dividend, and is increasing shareholder value by a $420 million share repurchase program. Wall Street analysts expect the uniform rental market growth to outpace GDP (gross...