Cintas Corporation (NASDAQ:CTAS) Q4 2023 Earnings Call Transcript

J. Michael Hansen: Toni, that’s a really difficult thing to try to say one point of inflation equals x points of margin. That’s pretty difficult to do. But I’d maybe say this. When you think about our cost structure, we’ve got a really nice mix of cost types, if you will. So we certainly have things like labor that are impacted by inflationary pressures. And we work very, very hard on that over the course of the last five years, I would say. And we’re in a good spot. But then we also have this large part of our cost structure that is amortizing. And it allows us to effectively see any inflationary impacts coming if they are coming and plan for them accordingly. And so we may plan for that in terms of our pricing approach, we may plan for that in terms of other initiatives.

But the point is, because we’re amortizing those costs, it takes a while for inflation to get to us, and during that period of time, we can plan and we can anticipate better. While we’re on that bucket, I would say our global supply chain really does a nice job of not being single sourced. And so when there are some inflationary pressures in various parts of the world or in our supply chain, because we’re not single source, we have the ability to move volume a little bit in flex, we have choices. And that’s important for us. And it has been important for us over the course of the last two years in the high inflationary environment. And then the third bucket that I would throw out is sort of that infrastructure. We’ve got a large infrastructure, 400-plus locations around the country.

And when we are growing really nicely, we’re leveraging it very, very well, and we’ve done that over the course of the last few years. And so Toni, we’re not a product company that is dramatically affected by today’s inflation. And you hear us talk about pricing is just one lever that we have to get margin improvement. And that’s because of, number one, we’ve got this sort of diverse cost structure. And number two, we’ve got a lot of initiatives and things that we’re working on. And it gives us choices. And that’s the — that’s really the key for us in terms of fighting inflation. So hopefully, that answers the question. It’s not an easy metric for us because of the cost structure that we have and the initiatives that we have, and it also depends on where the inflation comes from.

Toni Kaplan: Super. Thanks a lot.

Operator: And this concludes our question-and-answer session. I’d like to turn the call back to Mr. Mattingley for any additional or closing remarks.

Jared Mattingley: Thank you for joining us this morning. We will issue our first quarter fiscal ’24 financial results in September. We look forward to speaking with you again at that time. Thanks.

Operator: This concludes today’s conference call. Thank you for attending.