Item 1. Business
Item 1. Business
Overview
Superior Group of Companies, Inc. (together with its subsidiaries, “the Company,” “Superior,” “we,” “our,” or “us”) was organized in 1920 and was incorporated in 1922 as a New York company under the name Superior Surgical Mfg. Co., Inc. In 1998, the Company changed its name to Superior Uniform Group, Inc. and redomiciled to Florida. In 2018, the Company changed its name to Superior Group of Companies, Inc.
On May 1, 2022, the Company, through BAMKO, acquired substantially all of the assets of Guardian Products, Inc. (“Guardian”) based in Norcross, Georgia. Guardian is a branded merchandise company that is one of the leading providers of promotional products to automotive dealers nationwide.
Superior is comprised of three reportable business segments: (1) Branded Products, (2) Healthcare Apparel, and (3) Contact Centers.
Superior’s Branded Products segment, primarily through its signature marketing brands BAMKO® and HPI®, produces and sells customized merchandise, promotional products and branded uniform programs. Branded products are manufactured through third parties or in Superior’s own facilities, and are sold to customers in a wide range of industries, including chain retailer, food service, entertainment, technology, transportation and a wide range of other industries. The segment currently has sales offices in the United States, Canada, Brazil, the United Kingdom and Colombia, with support services in China and India.
Superior’s Healthcare Apparel segment, primarily through its signature marketing brands Fashion Seal Healthcare®, CID Resources and Wink™, and its license with Carhartt® manufactures (through third parties or in its own facilities) and sells a wide range of healthcare apparel, such as scrubs, lab coats, protective apparel and patient gowns. This segment sells healthcare service apparel to healthcare laundries, dealers, distributors and physical and e-commerce retailers primarily in the United States.
Superior’s Contact Centers segment, through multiple The Office Gurus® entities, including subsidiaries in El Salvador, Belize, Jamaica, Dominican Republic and the United States (collectively, “TOG”), provides outsourced, nearshore business process outsourcing, contact and call-center support services to North American customers.
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Products
The Company produces and manufactures (through third parties or in its own facilities) and sells a wide range of promotional products and branded uniforms in its Branded Products segment and healthcare apparel and accessories in its Healthcare Apparel segment.
The Company’s principal products segments are:
Branded Products Segment:
Customized products to support:
• Branded marketing programs;
• Gifts with purchase;
• Branded uniform programs;
• Corporate awards, incentives and recognition programs;
• Event promotions;
• Employee and consumer rewards and incentives; and
• Specialty packaging and displays.
Healthcare Apparel Segment:
Career and service apparel for personnel of hospitals and healthcare facilities, such as:
• Fashionable scrubs;
• Institutional scrubs;
• Laboratory coats;
• Patient gowns;
• Miscellaneous products for use by linen suppliers and industrial launderers (e.g. industrial laundry bags);
• Clean room apparel;
• Personal protective equipment (e.g.; isolation gowns and barrier fabric lab wear); and
• Other mission-critical apparel to healthcare laundries, institutions and professionals.
Our products are either distributed through our distribution centers in the United States or shipped directly from our vendors to our customers.
For a depiction of net sales from external customers, Segment Adjusted EBITDA and total assets by segment for the years ended December 31, 2023 and 2022, please refer to Note 17 to our Consolidated Financial Statements included in Part II, Item 8 (“Financial Statements and Supplementary Data”) (collectively referred to as “Financial Statements,” and individually referred to as “statements of comprehensive income (loss),” “balance sheets,” “statements of shareholders’ equity,” and “statements of cash flows” herein).
During the years ended December 31, 2023 and 2022, our Branded Products segment accounted for approximately 63% and 67%, respectively, of net sales. During the years ended December 31, 2023 and 2022, our Healthcare Apparel segment accounted for approximately 21% and 20%, respectively, of net sales.
For more information on our reportable business segments, please refer to “ Item 7. Management ’ s Discussion and Analysis of Financial Condition and Results of Operations – Business Outlook, ” which disclosure is incorporated herein by reference.
Services
Through the recruitment and employment of highly qualified English, Spanish and bilingual-speaking agents, we provide our customers with outsourced, nearshore business process outsourcing, contact and call-center support services to North American customers in our Contact Centers segment. During the years ended December 31, 2023 and 2022, our Contact Centers segment accounted for approximately 16% and 13%, respectively, of net sales.
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Competition
Superior competes in its Branded Products segment with a multitude of national and regional companies, such as, BDA, Inc., HALO Branded Solutions, Inc., Staples, Inc., Cimpress PLC, HH Global Group Limited, Lands’ End, Inc. and Workwear Outfitters, LLC. Superior also competes with local firms in most major metropolitan areas. The nature and degree of competition varies with the customer and the market. We believe our creative services, product development, proprietary web and technology capabilities and extensive global sourcing network, along with our major brands, enable us to be competitive and grow in this market.
Major competitors for our Healthcare Apparel segment include companies such as Medline Industries, Inc., Careismatic Brands, Barco Uniforms, Inc., FIGS, Inc., Encompass Medical and Standard Textile Co., Inc. We are a significant supplier of caregiver and patient apparel to hospitals, laundries and distributors that service hospitals and consumers. We believe that the strength of our brands and marketing, coupled with the quality of our products, allow us to compete effectively.
The market in which our Contact Centers segment operates has evolved into a global multi-billion dollar marketplace that is highly competitive and fragmented. TOG’s competitors in the Contact Centers segment range in size from very small firms offering specialized services or short-term project completion to very large firms, and include the in-house operations of many customers and potential customers. We compete directly and indirectly with various companies that provide contact center and other business process solutions on an outsourced basis such as TaskUs, Transparent BPO, Concentrix + Webhelp, Focus Services, Ubiquity, CCI and RDI. TOG also competes with local entities in other offshore locations. The list of potential competitors includes both publicly traded and privately held companies.
Customers
Branded Products, Healthcare Apparel and Contact Centers segments have a substantial number of customers, none of which accounted for more than 10% of each segment’s 2023 net sales.
Resources Material to Our Business
Raw Materials
The principal fabrics used in the manufacture of finished apparel goods for Superior’s Branded Products segment and Healthcare Apparel segments are cotton, polyester, spandex, cotton-synthetic and poly-synthetic blends. The majority of such fabrics are sourced in China. If Superior or its suppliers are unable to source raw materials from China, it could significantly disrupt Superior’s business as it also would for our competitors.
Superior does not have a concentration of suppliers of finished apparel in any single country or region of the world, however, it does contract to manufacture or source the majority of its apparel in Bangladesh, China, Haiti, Madagascar, Vietnam and the United States. Additionally, we generally source or manufacture apparel in parts of the world that may be affected by economic uncertainty, political unrest, labor disputes, health emergencies, or the imposition of duties, tariffs or other import regulations by the United States. The Company believes that its vast redundant network of suppliers, including its own manufacturing facilities in Haiti, provide sufficient capacity to mitigate most dependency risks on a single supplier.
The Branded Products segment also relies on the supply of other types of raw materials, including plastic, glass and metal. The vast majority of these raw materials are principally sourced from China, either directly by BAMKO or its suppliers. If we are unable to continue to obtain our raw materials and finished products from China or if our suppliers are unable to source raw materials from China, it could significantly disrupt our business.
Prices within the promotional products industry can be directly affected by the cost of raw materials. The market for promotional products is price sensitive and has historically exhibited price and demand cyclicality. The Branded Products segment has flexibility in its suppliers, as other suppliers of the same or similar products are widely available. Additionally, the nature of the promotional products industry is such that should specific types of raw materials undergo significant cost increases, it is possible that alternative products using different materials could be utilized for similar promotional activities. However, if cost increases cannot be entirely passed on to customers and alternative suppliers or suitable product alternatives are unavailable, profit margins could decline.
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Intellectual Property
Superior owns and uses several trade names, trademarks and service marks relating to its brands that have significant value and are instrumental to its ability to market its products. Superior’s most significant trade names are BAMKO® and HPI® within the Branded Products segment, CID Resources within the Healthcare Apparel segment and The Office Gurus® within the Contact Centers segment. Superior’s most significant trademarks, which are critically important to the marketing and operation of Superior’s Healthcare Apparel segment, are Fashion Seal Healthcare ® and Wink™. For the year ended December 31, 2023, Fashion Seal Healthcare (presently registered with the United States Patent and Trademark Office until 2029) and Wink™ represented approximately 39% and 43%, respectively, of sales in that segment.
Seasonal Fluctuations
Our results of operations have not historically reflected material seasonal tendencies and we do not believe that seasonal fluctuations will have a material impact on us in the foreseeable future.
Effects of Compliance with Government Regulations
Trade Regulations
As disclosed above, the Company’s suppliers generally source or manufacture finished goods in parts of the world that may be affected by the imposition of duties, tariffs or other import regulations by the United States. The Company believes that its redundant network of suppliers, including its own manufacturing facilities in Haiti, provide sufficient capacity to mitigate any dependency risks on a single supplier.
The Branded Products segment relies on raw materials that are principally sourced from China, either directly by BAMKO or its suppliers. If we are unable to continue to obtain our raw materials and finished products from China or if our suppliers are unable to source raw materials from China, it could significantly disrupt our business. Further, we are affected by economic, political and other conditions in China and the United States, including those resulting in the imposition or increase of import duties, tariffs and other import regulations and those relating to widespread health emergencies and deteriorating diplomatic relations with China, which could have a material adverse effect on this business segment.
Environmental Matters
Compliance with federal, state, and local laws regulating the discharge of materials into the environment, or otherwise relating to the protection of the environment, has had no material effect upon our operations or earnings, capital expenditures or competitive position and we do not expect it to have a material impact in the foreseeable future.
Human Capital Resources
The Company’s key human capital management objectives are to attract, retain and develop quality talent. To support these objectives, the Company’s human resources initiatives are designed to: keep people safe and healthy; enhance the Company’s culture; acquire and retain diverse talent; reward and support employees through competitive pay, benefits and other programs; and develop talent to prepare them for critical roles and leadership positions.
As of December 31, 2023, the Company had approximately 6,900 employees worldwide, of which approximately 6,800 were full-time employees and approximately 100 were part-time employees. As of December 31, 2023, approximately 830 employees were employed in the U.S. and approximately 6,070 employees were employed in foreign countries. The Contact Centers segment has the Company’s largest labor force at approximately 4,300 full-time employees as of December 31, 2023.
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Available Information
The Company maintains an internet website at the following address: www.superiorgroupofcompanies.com. The information on the Company’s website is not incorporated by reference in this annual report on Form 10-K.
We make available on or through our website certain reports and amendments to those reports that we file with or furnish to the Securities and Exchange Commission (the “SEC”) in accordance with the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These include our annual reports on Form 10-K, our quarterly reports on Form 10-Q, our current reports on Form 8-K, and Section 16 filings, and amendments thereto, by our officers, directors and 10% shareholders. We make this information available on our website free of charge as soon as reasonably practicable after we or they electronically file the information with, or furnish it to, the SEC. We also provide electronic copies of such filings free of charge upon request.