Cintas Corporation (CTAS) faced heightened operational and financial challenges in the third quarter of 2025, with labor constraints, margin compression from industry-wide pricing dynamics, and elevated input costs impacting profitability. The company's adjusted earnings per share declined 12% year-over-year, signaling continued pressure on its business services model.
- Adjusted EPS declined 12% YoY to $2.15 in Q3 2025
- Gross margin fell to 45.8% from 47.1% in Q3 2024
- Wage costs rose 4.1% and employee turnover increased 6.3%
- Input costs up 8.7% YoY, primarily driven by supplies and logistics
- North American revenue growth slowed to 2.1% amid client retention issues
- CTAS shares dropped 3.6% in after-hours trading post-earnings
Cintas Corp (CTAS) reported a sharper-than-expected decline in third-quarter performance, driven by persistent employment shortages, intensified pricing competition, and rising operational costs. The company recorded adjusted earnings per share of $2.15, down from $2.45 in the same period last year, reflecting a 12% year-over-year decrease. Revenue increased modestly to $1.12 billion, but growth was largely offset by margin erosion, with gross margin contracting to 45.8% from 47.1% in Q3 2024. The core challenges stemmed from sustained labor market tightness in the U.S. commercial services sector, where Cintas reported a 6.3% increase in employee turnover and a 4.1% rise in average wage costs. The company also noted that pricing pressures from both clients and competitors restricted its ability to pass on cost increases fully, particularly in uniform rental and facility services. Input costs, including cleaning supplies and transportation, rose 8.7% compared to Q3 2024, further squeezing operating margins. The impact was most pronounced in the North American segment, which accounts for over 85% of total revenue. Cintas cited slower client retention in mid-market accounts and reduced contract renewals due to cost sensitivity. While the company maintained a strong balance sheet with $1.8 billion in cash and short-term investments, leadership acknowledged that near-term profitability will remain under pressure unless labor and pricing dynamics stabilize. Investors reacted cautiously, with CTAS shares dropping 3.6% in after-hours trading. The stock has underperformed the S&P 500 Industrials Sector Index by 9.2 percentage points year-to-date, raising concerns about the company's ability to sustain growth amid macroeconomic headwinds. Analysts are now revising full-year earnings forecasts downward, with consensus estimates now calling for adjusted EPS of $8.90, down from $9.25 earlier in the year.