In an effort to reposition its portfolio, G&K Services, Inc. (GK) recently divested its direct sale program business. Additionally, the company sold its operation in Ireland. Total proceeds from the divestiture were $6.6 million.
Since 2009, the company has been making restructuring efforts to generate better growth opportunities. The company divested several non-strategic business units that no longer fit its long-term strategy. Instead, the company focused more on rental and direct sale catalog operations that offer higher growth potential.
Going forward, these transactions are likely to improve G&K’s overall profit margins and return on invested capital, and help it achieve its corporate objective. These divestitures also enhance the company’s liquidity and enable it to make more viable investments.
In the last reported quarter, the rental organic growth rate, which adjusts for the impact of currency exchange rate differences, acquisitions and divestitures, was 3.7%. Going forward, the company expects fiscal 2014 revenues in the range of $930 million to $950 million, with earnings per share between $2.80 and $3.00.
G&K Services provides branded uniform and facility services programs in the United States, Canada, Ireland and the Dominican Republic. The company’s facility-services programs comprise floor mat offerings, including traction control, logo, message, scraper and anti-fatigue; towel products, such as shop, kitchen, bar, bath, dish, continuous roll, and microfiber; dust, microfiber, and wet mops; fender covers; linen items; and restroom hygiene products.
G&K Services currently holds a Zacks Rank #3 (Hold). Other players in the industry worth looking at include Cintas Corp. (CTAS), Franklin Covey Co (FC) and Huron Consulting Group Inc (HURN), each carrying a Zacks Rank #2 (Buy).
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