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Cintas Extends Europe Footprint

Zacks Equity Research

Cintas Corporation (CTAS) recently extended its operations in Europe by forging a new commercial partnership with The CALVELEX GROUP, a Portugal-based clothes manufacturing company. With this strategic tie-up, Cintas will likely expand its uniform design, production and support services in Europe to meet the increased demand for corporate apparel services.

The European uniform business of Cintas comprises indigenously-built custom-designed uniform for domestic as well as internationally recognized four- and five-star hotels. By expanding its geographical footprint, the company intends to offer inventory, distribution, and manufacturing expertise at the local level for the first time, which is likely to improve its profitability in the long run.

At the same time, the move will facilitate a prompt service to better serve its existing clientele in the U.K., including Marriott and Four Seasons hotels of Marriott International, Inc. (MAR) and Hilton Hotels & Resorts.

Cintas has been facing severe challenges in recent times from the soft European market and has remained afloat by divesting profitable businesses and stringent cost-cutting initiatives. Consequently, this strategic partnership is expected to reap huge financial benefits for the company.

On the other hand, by partnering Cintas, CALVELEX would strive to leverage its state-of-the-art technological equipment and production process, timely delivery schedule, and certified management system to reach newer heights. With over 28 years of experience in exporting and in the international textiles business arena, the company would also bring on board an in-depth know-how of the manufacturing business for Cintas.

Cincinnati, Ohio-based Cintas provides specialized services to diversified businesses throughout North America. The company designs, manufactures, implements corporate identity uniform programs, and provides entrance mats, restroom supplies, promotional products and first aid and safety products for over one million businesses.

We maintain our long-term Neutral recommendation on the stock, which currently has a Zacks Rank #3 (Hold).

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