Business Overview and History
Superior Group of Companies, Inc. (NASDAQ:SGC) is a diversified global enterprise with a rich history spanning over a century. Founded in 1920 as a family-run uniform business, the company has evolved into a leading provider of branded products, healthcare apparel, and contact center services, serving a wide range of industries. With a strong focus on quality, customer service, and technological innovation, Superior Group of Companies has successfully navigated various economic and industry challenges, emerging as a resilient and adaptable player in its respective markets.
Superior Group of Companies' origins can be traced back to 1920, when Rose Benstock established Superior Surgical Mfg. Co., Inc. in New York. Initially focused on manufacturing and supplying uniforms, the company was incorporated in 1922. In 1998, the company redomiciled to Florida and changed its name to Superior Uniform Group, Inc. to better reflect its growing diversification.
In 2018, the company underwent another name change, becoming Superior Group of Companies, Inc., as it continued to build out its three core business segments: Branded Products, Healthcare Apparel, and Contact Centers. This strategic shift allowed the company to leverage its expertise and resources across a broader range of industries, positioning it for long-term growth and success.
The company's expansion beyond uniforms and apparel has been marked by strategic acquisitions and new business ventures. In 2018, Superior Group acquired CID Resources, a provider of healthcare apparel such as scrubs and lab coats, strengthening its presence in the healthcare apparel market. The company also launched its Contact Centers segment in 2008, providing outsourced business process outsourcing and contact center services to customers.
Despite its overall success, Superior Group has faced challenges in recent years. In 2022, the company reported a net loss of $32 million due to $51.5 million in impairment charges related to the write-down of certain capital assets. This was attributed to the impact of the COVID-19 pandemic and related economic conditions. However, the company demonstrated its resilience by rebounding in 2023, reporting net income of $8.8 million.
Today, Superior Group of Companies is a well-diversified enterprise with a significant global footprint. The Branded Products segment, which includes the BAMKO and HPI brands, produces and sells customized merchandising solutions, promotional products, and branded uniform programs to a diverse customer base. The Healthcare Apparel segment, featuring the Fashion Seal Healthcare, Wink, and CID Resources brands, manufactures and sells a wide range of healthcare-related apparel and accessories. The Contact Centers segment, under the The Office Gurus (TOG) brand, provides outsourced, nearshore business process outsourcing and customer support services to North American customers.
Financial Highlights and Performance
Superior Group of Companies has demonstrated consistent financial performance, even in the face of challenging macroeconomic conditions. For the fiscal year ended December 31, 2024, the company reported total net sales of $565.68 million, up 4.1% from the prior year. This growth was driven by strong performance across all three of the company's business segments.
The Branded Products segment accounted for $353.31 million, or 62.5%, of the company's total net sales in 2024, while the Healthcare Apparel segment contributed $119.19 million, or 21.1%, and the Contact Centers segment generated $96.95 million, or 17.1%. The company's consolidated gross margin for the year was 39.0%, reflecting a 150-basis-point improvement compared to the prior year.
Net income for the fiscal year 2024 was $12.00 million, representing a 36.8% increase from the previous year. The company's EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) for the year was $34.10 million, up 1.8% from 2023. Superior Group of Companies' strong financial performance has enabled the company to maintain a healthy balance sheet, with a net leverage ratio of 1.7x as of December 31, 2024, down from 2.0x at the start of the year.
For the most recent quarter (Q4 2024), Superior Group of Companies reported revenue of $145.4 million and net income of $2.1 million. Compared to Q4 2023, revenue decreased by 1% and net income decreased by 42%. The decrease in net income was primarily due to lower gross margins in the Healthcare Apparel segment driven by higher manufacturing costs in Haiti.
In terms of cash flow, the company generated $33.43 million in operating cash flow and $28.99 million in free cash flow for the fiscal year 2024.
Segmental Performance and Strategic Initiatives
Branded Products Segment The Branded Products segment has been a key driver of Superior Group of Companies' growth, accounting for the majority of the company's total revenue. In 2024, this segment generated $353.31 million in net sales, a 3.1% increase from the prior year. The segment's performance was buoyed by the expansion of business within existing accounts and the acquisition of new clients. To further bolster growth, the company has been investing in its sales leadership team to deepen relationships with existing customers and acquire new ones.
The segment's gross margin rate improved to 35.3% in 2024, up from 33.5% in the prior year, primarily driven by sourcing mix resulting in lower product costs and pricing increases to existing customers. Selling and administrative expenses as a percentage of net sales increased to 26.7% from 25.7% in the prior year, primarily due to increased employee-related costs and sales commissions, partially offset by a decrease in bad debts expense.
The Branded Products segment currently has sales offices in the United States and Brazil, with support services in China and India. Products are manufactured through third parties or in Superior's own facilities and are sold to customers in a wide range of industries, including retail, hotel, food service, entertainment, technology, transportation, and other sectors.
Healthcare Apparel Segment The Healthcare Apparel segment reported net sales of $119.19 million in 2024, up 4.7% year-over-year. This growth was primarily driven by increased demand for the segment's digital sales channels, both from wholesale customers and direct-to-consumer. The company has been actively investing in sales, branding, and marketing initiatives to enhance brand awareness and capitalize on the growing demand for its retail-facing brands, such as Wink and Carhartt Medical.
The segment's gross margin rate improved to 38.4% in 2024, up from 37.1% in the prior year, primarily driven by lower supply chain costs. Selling and administrative expenses as a percentage of net sales increased to 34.5% from 33.6% in the prior year, primarily attributable to an increase in expenditures related to marketing and advertising activities along with employee-related costs.
The Healthcare Apparel segment, through its signature marketing brands Fashion Seal Healthcare, Wink, and CID Resources, manufactures and sells a wide range of healthcare apparel, such as scrubs, lab coats, protective apparel, and patient gowns. Products are manufactured through third parties or in Superior's own facilities and are sold to healthcare laundries, dealers, distributors, and retailers primarily in the United States.
Contact Centers Segment The Contact Centers segment, operating under the The Office Gurus (TOG) brand, generated net sales of $96.95 million in 2024, representing a 6.0% increase before intersegment eliminations and 7.4% after intersegment eliminations compared to the prior year. This segment has emerged as Superior Group of Companies' highest-margin business, benefiting from the growing trend toward outsourced customer contact management services. The company has been implementing advanced technologies to enhance the customer experience and optimize its own cost structure, positioning the segment for continued growth.
The segment's gross margin rate remained relatively flat at 53.8% in 2024, compared to 53.7% in the prior year, as cost increases kept pace with revenue increases. Selling and administrative expenses as a percentage of net sales increased to 44.4% from 43.4% in the prior year, primarily attributable to an increase in employee-related expenses, including both headcount and select pay rate increases to support sales growth, as well as an increase in bad debts expense.
The Contact Centers segment provides outsourced, nearshore business process outsourcing, contact, and call-center support services to North American customers through multiple The Office Gurus entities, including subsidiaries in El Salvador, Belize, Jamaica, Dominican Republic, and the United States.
Navigating Challenges and Seizing Opportunities
Superior Group of Companies has demonstrated its ability to navigate various macroeconomic and industry-specific challenges, including the impact of the COVID-19 pandemic, geopolitical tensions, and inflationary pressures. The company's diversified business model, strong brand portfolio, and emphasis on operational excellence have been instrumental in its resilience.
During the pandemic, the company quickly pivoted to address the surge in demand for personal protective equipment (PPE), such as facemasks, while also maintaining its core product offerings. This agility allowed Superior Group of Companies to capitalize on new market opportunities while supporting its customers' evolving needs.
Moreover, the company has proactively managed the impacts of global supply chain disruptions and rising input costs. By diversifying its supplier base and implementing strategic pricing adjustments, Superior Group of Companies has been able to mitigate the effects of these external challenges and maintain its profitability.
Looking ahead, the company remains focused on seizing opportunities within its core markets. In the Branded Products segment, the company is investing in new sales talent to drive further market share gains. In Healthcare Apparel, the company is leveraging its strong brand recognition and digital capabilities to expand its direct-to-consumer and wholesale customer base. The Contact Centers segment continues to benefit from the growing trend toward outsourced customer support services, and Superior Group of Companies is well-positioned to capture this demand through its innovative technology and operational expertise.
Financial Outlook and Guidance
Superior Group of Companies has demonstrated a track record of meeting and exceeding its financial targets. For the full year 2024, the company had raised its guidance after the first quarter, and its actual full-year 2024 results were within the raised outlook ranges. Specifically, the company's full-year 2024 consolidated revenue was up 4% and diluted EPS was up 35% compared to the prior year.
Looking ahead to 2025, Superior Group of Companies has provided initial guidance that reflects continued growth and profitability. The company expects revenues to be in the range of $585 million to $595 million, suggesting year-over-year growth of up to 5% at the high end. Diluted EPS is projected to be in the range of $0.75 to $0.82, indicating potential year-over-year growth of up to 12% at the high end.
It's worth noting that Superior Group of Companies anticipates a back-end weighted cadence to 2025, similar to the pattern observed in the past two years. This guidance underscores the company's confidence in its strategic initiatives and its ability to capitalize on growth opportunities across its diverse business segments.
Liquidity and Capital Structure
Superior Group of Companies maintains a strong financial position, providing the company with flexibility to pursue growth opportunities and navigate potential challenges. As of December 31, 2024, the company reported the following key financial metrics:
- Cash Balance: $18.77 million - Debt/Equity Ratio: 0.51 - Current Ratio: 2.68 - Quick Ratio: 1.73
The company has access to substantial liquidity through its credit facilities. Superior Group of Companies maintains a $125 million revolving credit facility and a $75 million term loan, with the ability to request up to an additional $75 million in incremental facilities. As of December 31, 2024, the company had $103 million of undrawn capacity on the revolving credit facility, providing ample financial flexibility for future investments and potential acquisitions.
Industry Trends and Market Position
Superior Group of Companies operates in several large, fragmented markets that have historically grown at low to mid-single digit annual rates. These include the branded uniforms, healthcare apparel, and promotional products industries. The company's diversified business model and strong brand portfolio have allowed it to maintain a competitive position in these markets.
The contact center outsourcing industry, served by the company's Contact Centers segment, has experienced strong growth in recent years as businesses increasingly look to reduce costs while maintaining high-quality customer support. Superior Group of Companies is well-positioned to capitalize on this trend through its The Office Gurus brand and its strategic locations in nearshore markets.
While the company does not break out financial performance by geographic market, as a small-cap company, the majority of its sales are likely concentrated within the United States. However, the company's global footprint, including sales offices in Brazil and support services in China and India, provides opportunities for international expansion and diversification.
Conclusion
Superior Group of Companies' impressive history, diversified business model, and adaptable strategy have positioned the company for long-term success. By continuously innovating, expanding its product and service offerings, and capitalizing on emerging market trends, the company has demonstrated its ability to navigate challenging environments and deliver consistent financial performance.
The company's strong performance in 2024, coupled with its positive outlook for 2025, reflects the success of its strategic initiatives and the resilience of its business model. With a solid financial foundation, diverse revenue streams, and a focus on high-growth markets, Superior Group of Companies is well-positioned to continue its trajectory of growth and value creation for shareholders.
As Superior Group of Companies celebrates its 105-year legacy, investors can look forward to the company's continued evolution and its commitment to creating extraordinary brand engagement experiences for its customers and employees. The company's ability to adapt to changing market conditions, invest in growth opportunities, and maintain a strong financial position bodes well for its future prospects in the dynamic and competitive industries it serves.