UPDATE 1-G&K Services cuts Q1 outlook on economic woes, costs

lunes 6 de octubre de 2008 23:32 CEST
 

(Recasts; adds details, share movement)

Oct 6 (Reuters) - Uniform-rental company G&K Services Inc GKSR.O slashed its first-quarter outlook, citing U.S. economic woes and expenses related to its cost-cutting efforts, sending its shares down 6 percent.

G&K Services, which closed plants, cut jobs and outsourced certain plant functions to fight rising energy and raw material prices, said it will incur severance, facility closure and operational costs of about $2.5 million.

The company said the expense-reduction actions and expansion of reserves will hurt its first-quarter earnings by about 42 cents a share.

Worker-uniform suppliers like Cintas (CTAS.O: Cotización) and G&K Services have seen their market value shrink as the housing downturn, tighter lending conditions and rising costs pull down the U.S. economy and force companies to shed jobs.

G&K Services, which has been grappling with rising prices for textiles, freight, and hangers, said it sees a first-quarter profit of 7 cents to 9 cents a share, down from its prior outlook of 53 cents to 57 cents a share.

The Minnesota-based company expects revenue of $245 million to $246 million for the period. It had earlier forecast revenue of $249 million to $252 million.

Analysts on average were expecting earnings of 56 cents a share, before special items, on revenue of $251.7 million, according to Reuters Estimates.

Shares of the company were down $1.81 at $28.20 in trading after the bell. They had closed at $30.01 Monday on Nasdaq. (Reporting by Dhanya Skariachan in Bangalore; Editing by Vinu Pilakkott)