Key Sectors Mostly Up – Baird Releases 2Q Survey Results

Robert W. Baird & Co. recently released the results of its Second-Quarter 2024 Textile Rental Services Survey. Revenue growth expectations trended higher than last quarter on the uniform rental side of the business, while this metric remained stable in the linen rental survey.

On the uniform rental side, the results were mixed, with the Add/Stop index turning negative for the first time since 2020. Offsetting these results, revenue growth expectations improved from the most recent survey data, and more respondents beat their revenue forecasts for second quarter than fell short. New business interest also remains strong. The Add/Stop indicator is notable; however, with some data demonstrating labor moderation, despite positive underlying employment gains. Baird noted that it “continues to see more positives than negatives for the sector, however.”

Highlights from the uniform rental survey include:

• Revenue Trends. 35% of respondents beat internal revenue expectations for the quarter versus 29% falling short (6% as expected). The positive spread reverses two quarters of revenue falling short of expectations and is a positive data point.
• Add/Stops. Employment-driven expansion at existing accounts (i.e., Add/Stop Diffusion Index) turned negative at 47.1 for the first time since December 2020 (and down from 56.7 last quarter).
• New Business Interest. Baird’s no-programmer diffusion index (a measure of the amount of new business available) strengthened to 55.9 in 2Q24 (53.3 in 1Q24). This index has been vacillating between positive and negative.
• Growth Outlook. Respondents expect a nearly 5.5% rental revenue growth over the next 12 months, much higher than recent 4.0-4.5% expectations.

On the linen rental side of the business, trends remain strong, with all major metrics holding stable or improving from 1Q24 levels. Revenue growth expectations were stable and support mid-single-digit gains. Continued strong no-programmer interest strengthened from 1Q24 levels. More respondents beat their internal revenue growth expectations than fell short.

Highlights from the linen rental survey include:

• Rental Revenue Trends. 43% of respondents cited rental revenue trends above expectations with 43% in-line with expectations and just 14% falling short. A 29% relative spread continues trends of revenue at/above expectations versus uniform rental, where this data point has been mixed.
• No-Programmers. No-programmer interest remained solidly positive at 60.7 and improved from 55.6 last quarter. The index has been in expansionary territory since dipping negative in 2020.
• Growth Outlook. Forecasted 12-month revenue outlook held mostly stable at 4.7%, slightly above the outlook last quarter (+4.4%).

Finally, on the healthcare side of the linen, uniform and facility services industry, survey respondents noted positive trends in rental revenue growth over the past 90 days compared to last year’s levels. A total of 80% of healthcare operators noted that their revenues over the past 90 days were at or above last year’s levels.

Survey participants include senior executives at linen, uniform and facility services companies across the United States, with some operations in Canada and other international locations. The total response pool includes nearly 500 independent firms.

Click here to view the full report. If you have any questions or comments, or would like to participate in the survey moving forward, contact Baird Senior Analyst Andrew Wittmann at awittmann@rwbaird.com or Senior Analyst Justin Hauke at jhauke@rwbaird.com.