SUPERIOR GROUP OF COMPANIES, INC. (SGC)·Q1 2025 Earnings Summary

Executive Summary

• Q1 2025 was soft: revenue declined 1.2% year over year to $137.1M and EPS fell to -$0.05, with EBITDA down to $3.5M as gross margin compressed and Branded Products mix skewed toward lower-margin items .
• The company cut FY 2025 revenue guidance to $550–$575M and withdrew EPS guidance due to heightened tariff-related macro uncertainty; management executed ~$13M annualized SG&A cuts starting in April to protect profitability .
• Consensus for Q1 2025 was $139.9M revenue and $0.12 EPS; SGC missed on both metrics (actual $137.1M and -$0.05), driven by margin pressure and slower uniform program rollouts; three covering estimates contributed to consensus* .
• Near-term catalysts: tariff trajectory and pass-through pricing, Q2 demand recovery in Branded Products pipeline, and realization of SG&A savings; potential stock pressure from guidance cut offset by buybacks and dividend continuity .

What Went Well and What Went Wrong

What Went Well

• Branded Products pipeline/booking strength with record opportunities and >90% retention; management expects a “relatively strong” Q2 and continued market share gains as the eighth largest distributor in a fragmented market .
• Contact Centers grew revenue 3% YoY; gross margin held ~flat at 53.6%, supported by new customers and a newly built sales team winning RFPs and building a record pipeline .
• Active capital returns: repurchased ~294k shares for $3.8M and maintained the $0.14 quarterly dividend, underscoring balance sheet flexibility and capital allocation discipline .

What Went Wrong

• Consolidated gross margin rate fell to 36.8% vs 39.8% prior year, with Branded Products GM down (32% vs 36.5%) due to sourcing mix and customer mix; consolidated EBITDA declined to $3.5M vs $9.6M last year .
• Healthcare Apparel revenue declined 7% YoY, with expense deleverage (SG&A 34.9% of sales vs 33.6% last year) and segment EBITDA down to $1.5M from $2.6M .
• Macro/tariff uncertainty slowed customer decision-making; guidance was reduced and EPS outlook withdrawn given sensitivity to tariff developments and uneven visibility .

Financial Results

Consolidated Performance by Quarter

Q1 2025 Actual vs Consensus Estimates

Values retrieved from S&P Global*

Segment Breakdown – Q1 2025

KPIs and Operating Metrics

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “We generated sales similar to last year’s levels despite widespread client uncertainty... we are leveraging our experience... to proactively reduce expenses... and plan to continue actively repurchasing our shares... [and] our Board has again approved our quarterly dividend.” — CEO Michael Benstock .
• “Given the heightened economic uncertainty following the April tariff announcements, we currently expect revenues to be in the range of $550 million to $575 million... we are not providing an earnings per share outlook at this time.” — CFO Michael Koempel .
• “Our pipeline of business opportunities in branded products is setting new records... order backlog remains strong... gives us line of sight to Q2 being a relatively strong quarter.” — CEO Michael Benstock .
• “We executed approximately $13 million in annualized budgeted expenses... measures in place in the April time frame... vast majority will start to benefit the second quarter.” — CFO Michael Koempel .

Q&A Highlights

• Pipeline and Q2 visibility: Branded Products and Contact Centers pipelines are robust; management anticipates a relatively strong Q2 with ongoing share gains despite elongated decision cycles .
• Tariffs pass-through: SGC expects to pass on tariff-driven cost increases via contracts and PO terms; elasticity allows shifting to alternative products or geographies as needed, though timing lags may occur .
• SG&A cuts: ~$13M annualized reductions concentrated in SG&A across segments; benefits begin in Q2, with some savings ramping later in the year .
• Margin trajectory: Branded Products gross margin expected to rebound under normal circumstances; Q1 compression due to sourcing and pricing mix .
• Cash flow seasonality & leverage: Q1 operating cash flow seasonally pressured by bonus/benefit payments; leverage increased to 2.2x in Q1 but remains within covenants and is expected to improve through the year .

Estimates Context

• Q1 2025 results missed consensus: revenue $137.1M vs $139.9M* and EPS -$0.05 vs $0.12*, with three estimates contributing to consensus; shortfall driven by lower gross margin and softer uniform rollouts* .
• FY 2025 outlook reset: revenue guide lowered to $550–$575M and EPS withdrawn, implying sell-side models likely need to cut revenue and remove EPS targets pending tariff clarity .

Values retrieved from S&P Global*

Key Takeaways for Investors

• Near-term caution: Guidance cut and EPS withdrawal reflect tariff-driven visibility challenges; expect continued estimate downgrades and potential multiple pressure until macro clarity improves .
• Watch Q2 inflection: Branded Products bookings and backlog support a better Q2; execution on pass-through pricing and sourcing diversification will determine margin recovery pace .
• Cost discipline offsets demand softness: ~$13M SG&A reductions should support margin stabilization as savings flow through starting Q2 .
• Capital returns continue: Dividend maintained at $0.14 and buybacks ongoing, signaling management confidence and providing downside support .
• Segment mix matters: Branded Products margin normalization and Healthcare Apparel digital growth are key to restoring consolidated gross margin; Contact Centers provides margin ballast .
• Balance sheet flexibility: Leverage rose to 2.2x in Q1 on timing, but remains within covenants with ample liquidity to support operations; monitor leverage trend versus savings realization .
• Trading implications: Short-term sensitivity to tariff headlines and guidance updates; potential relief rally if Q2 delivers pipeline conversion and margin rebound while SG&A savings materialize .