Superior Uniform Group (SGC) Tops Q1 EPS by 8c, Revenues Miss

Superior Uniform Group (NASDAQ: SGC) reported Q1 EPS of $0.22, $0.08 better than the analyst estimate of $0.14. Revenue for the quarter came in at $94.2 million versus the consensus estimate of $89.91 million.

• Net Sales increased 8.9 percent
• Earnings per Share (Diluted) increased 37.5%

Michael Benstock, Chief Executive Officer, commented, “Under normal circumstances, this earnings release would talk about how pleased we are to report the strong operating results that we had in the first quarter with sales up nicely at 8.9% and earnings per share up 37.5% as we continue to execute against our long-term growth strategies. However, these are not normal times. While the COVID-19 pandemic only had a moderate impact on our operating results the last few weeks of the first quarter, it is expected to have a much more significant impact as we move forward. On the positive side, our healthcare uniform business is experiencing a tremendous surge in demand to support the increased requirements to outfit an ever-increasing number of healthcare workers on the front lines of the battle against the Coronavirus. Additionally, demand remains strong in the portion of our HPI business that supports businesses designated as essential such as grocery, big box retailers and pharmacy customers. These increases in demand are being offset by significant slowing in the dining, entertainment, lodging and transportation markets.

“In our promotional products segment, marketing budget reductions and event cancellations have impacted the entire branded merchandise industry, which is significantly event driven. A prolonged moratorium on events and a reduction of in-store promotions will negatively impact our operating results in this segment as we move forward. However, our BAMKO team, utilizing our strong sourcing network and resources has been instrumental in sourcing much needed personal protective equipment (PPE) that many customers have been asking for, filling a critical need during this crisis and helping to offset a significant amount of the negative impact in revenues. Many of these products are new revenue sources for BAMKO and other SGC divisions.

“Our BPO segment, The Office Gurus, experienced a slight disruption in business at the very end of the first quarter as they had to adjust quickly to the government action in El Salvador closing all call center facilities. They were able to pivot very quickly and successfully to a work from home model and continue to service their customers very well. To help offset the possibility of future deterioration in sales associated with the pandemic, we are actively pursuing several new opportunities from prospective clients that need support due to either their call center partner’s inability to deploy a work from home solution or their inability to continue to employ their own internal support.

We believe that once demand normalizes for our current clients’ needs, we will have the opportunity to explore more growth in our nearshore centers. We will also be prepared to capitalize on the new knowledge that we have acquired through this crisis and several new opportunities, such as the ability to increase our capacity substantially by continuing to work from home for certain accounts and offering this solution to future prospects. We also anticipate that some smaller nearby centers will be unable to weather the storm, making their clients and agents available to us, which will reduce our customer acquisition costs and recruiting expense.

“We are focused on maintaining liquidity during this time. We have demonstrated many times in the past that our balance sheet typically becomes more liquid in an economic downturn. We have made appropriate and significant reductions in operating expenses, and will also reduce certain capital expenditures to preserve capital. We are confident that we have access to adequate liquidity to meet our needs at this time. While the magnitude of this pandemic is larger than the many catastrophes and economic downturns that we have faced in the past century, we have a well-seasoned management team that has a long track record of weathering the storm and coming out of the back end even stronger than when it began.

“Our primary concern is for the safety of our workforce and customers. We are proud of our leadership and associates who have worked tirelessly at home, in factories, distribution facilities and our offices around the world to support the multitude of essential businesses that rely on us. We send our hopes and best wishes for good health to all of those who are working to ensure the well-being of our nation and the world. Those on the front line of this battle are heroes to all of us and deserve our respect, prayers, support and praise during this difficult time.”

For earnings history and earnings-related data on Superior Uniform Group (SGC) click here.

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