Business Context and Reporting Period
Company: Superior Group of Companies, Inc. (SGC)
Filing Type: Form 10-K (Annual Report)
Reporting Period: Fiscal year ended December 31, 2025
Business Overview: Superior operates three reportable segments: (1) Branded Products (promotional products and uniforms via BAMKO and HPI brands), (2) Healthcare Apparel (scrubs and protective gear via Wink and Fashion Seal Healthcare), and (3) Contact Centers (business process outsourcing via The Office Gurus). The company closed its Jamaica contact center operations on June 15, 2025.
Key Financial Metrics
| Metric (in thousands) | 2025 | 2024 |
|---|---|---|
| Net Sales | $566,184 | $565,676 |
| Gross Margin | $212,864 | $220,578 |
| Gross Margin Rate | 37.6% | 39.0% |
| Net Income | $7,000 | $12,004 |
| EBITDA | $25,744 | $34,097 |
| Operating Cash Flow | $19,709 | $33,428 |
| Total Debt | $93,656 | $86,035 |
| Cash and Equivalents | $23,691 | $18,766 |
| Dividends Paid | $8,905 | $9,284 |
Material Changes vs. Prior Period
- Revenue: Consolidated net sales increased marginally by 0.1% ($0.5 million). The Branded Products segment grew 2.2% ($7.8 million), driven by the December 2024 acquisition of 3Point Brand Management. Conversely, Healthcare Apparel declined 2.8% and Contact Centers declined 4.6% due to volume decreases and macroeconomic headwinds.
- Profitability: Net income decreased 41.7% to $7.0 million, and EBITDA fell 24.5% to $25.7 million. This decline was primarily caused by reduced gross margins across all three segments due to higher product costs and unfavorable sales mix.
- Costs: Selling and administrative expenses remained relatively flat (-0.2%). Interest expense decreased 19.1% to $5.1 million due to a lower weighted average interest rate (5.1% in 2025 vs. 5.5% in 2024).
- Capital Allocation: The company repurchased 921,911 shares in 2025 under a $17.5 million program, with $10.1 million remaining available. Capital expenditures were $3.9 million.
Guidance, Outlook, and Risks
Management Commentary & Outlook: Management expects continued pressure from global economic conditions, including inflation and interest rates. The company is monitoring the impact of new U.S. tariffs and the expiration of trade preferences (AGOA, HOPE, HELP) which were retroactively extended in February 2026. The company anticipates maintaining regular quarterly dividends subject to financial conditions.
Key Risks and Contingencies:
- Trade and Tariffs: Significant exposure to U.S. tariffs on goods sourced from China, Vietnam, and other regions. A new 10% tariff under Section 122 of the Trade Act of 1974 was implemented in February 2026 following a Supreme Court ruling invalidating previous IEEPA tariffs.
- Supply Chain Concentration: Majority of raw materials (fabrics) are sourced from China. Manufacturing facilities in Haiti face risks from civil unrest and natural disasters.
- Intangible Assets: The CID Resources trade name ($13.9 million carrying value) was identified as a critical audit matter due to impairment testing subjectivity. No impairment was recorded in 2025.
- Debt Covenants: The company is subject to a fixed charge coverage ratio of 1.25:1 and a net leverage ratio not exceeding 4.0:1. It was in compliance as of December 31, 2025.
Investor Verification Checklist
- Tariff Impact: Verify the financial impact of the new 10% Section 122 tariff and the status of refunds for duties paid during the interim period of expired trade agreements.
- Haiti Operations: Assess the stability of manufacturing facilities in Ouanaminthe, Haiti, given the risk of civil unrest and potential disruption to the Healthcare Apparel segment.
- Margin Compression: Monitor the ability to pass increased raw material and labor costs to customers to reverse the trend of declining gross margins (down 1.4 percentage points year-over-year).
- Intangible Valuation: Review the assumptions used in the impairment testing for the CID Resources trade name, specifically royalty rates and discount rates.
- Debt Capacity: Confirm continued compliance with credit agreement covenants, particularly the net leverage ratio, given the decline in EBITDA.