Superior Group Of Companies, In (NASDAQ:SGC)

SGC ($17.25) announced the acquisition of BAMKO Inc., a full-service merchandise sourcing and promotional products company based in Los Angeles, CA.  Details of transaction:

“The purchase price consists of approximately $15.8 million in cash, subject to adjustment, the issuance of approximately $5.5 million in shares of Superior Uniform Group’s common stock that will vest over a five year period, the potential future payment of up to $5.5 million in additional contingent consideration through 2021, and the assumption of certain liabilities of BAMKO.

BAMKO’s revenues for the year ended December 31, 2015, were approximately $31.5 million. We expect this acquisition to be accretive to our operating results in 2016 exclusive of acquisition related expenses.”

Assuming BAMKO’s net margins are similar to that of SGC’s (~6%), we believe the acquisition would add roughly $0.13 in EPS.

Third Quarter 2015 Results

• $56.7 million vs $52.3 million in the prior year

• EPS of $0.28 vs $0.24 in the prior year

Quotes from management:

“Operationally, we are meeting our growth milestones, and customer response to our product offerings remains strong in all areas of our business. Our solid financial position and healthy balance sheet allows us to respond more easily to changing market and economic conditions while continuing to deliver organic growth supplemented by accretive acquisitions."

Locked in gains on trade shares of SGC

On July 24, 2015 we stated we were adding SGC ($19.23) for a second time, short term trading shares around our core long position as we felt shares would gravitate back toward the $20 level and possibly higher.  It was via premium tweet on July 23, 2015 that disclosed a small amount of trading shares as the stock dipped under $17.00 on Q2 2015 results.   It was our argument that if you eliminated the unusually large order in Q2 2014, growth would have been healthy for Q2 2015.  This marked the second time in roughly a month that shares of SGC dipped sharply.  On June 15, 2015 we added shares as the stock sold off ~20% with no news.  On July 13, 2015, we locked in those trade shares as the stock was trading ~$20.00.   On Friday (July 31, 2015) we alerted that we were once again locking in gains (13%) from our July 24 trade shares as the stock traded over $19.00.  We are still long our core SGC position. 

Added GeoBargain $SGC On The Dip 

Yesterday, shares of GeoBargain SGC were down sharply.  Shares fell from $18.29 at the open to a low of $15.06.  After scanning the wires, checking SEC filings and reaching out to the company, we believe there was no operational cause for the drop.  Via premium tweet, when shares were trading ~$15.90, we stated we would nibble a trade position around our core as we felt the drop was unwarranted.  SGC operates through two segments, Uniforms and Related Products, and Remote Staffing Solutions.  One  issue short-term investors should be aware of is that SGC faces tough sales and EPS comps  for its Q2  ending June 30, 2015 due to some one-time orders that occurred in Q2 2014.  Shares could therefore remain weak in the near term.

SEMINOLE, Fla., Dec. 30, 2014 (GLOBE NEWSWIRE) -- Superior Uniform Group, Inc. (Nasdaq:SGC), manufacturer of uniforms, career apparel and accessories,today announced that its Board of Directors has authorized a two-for-one stock split of its outstanding common shares.

Each shareholder of record at the close of business on January 12, 2015, will receive one additional share of Common Stock for each share held on the record date, with a distribution date of February 4, 2015. This stock split will not change the proportionate interest that a shareholder maintains in the Company. As of December 29, 2014, there were approximately 6.8 million SGC diluted common shares outstanding. Following the stock split, Superior Uniform Group's outstanding common shares will increase to approximately 13.6 million shares.

Superior Uniform Group is undertaking the two-for-one stock split to make its common shares more readily accessible to the investment community, increase and broaden the Company's shareholder base, and improve liquidity of the market for SGC common shares. The company expects that its common stock will begin trading on a post-split basis on February 5, 2015.

Michael Benstock, Chief Executive Officer, commented: "We are pleased to announce the stock split as it reflects the Board's confidence in the long-term drivers for our business model and our ability to continue to achieve our strategic growth objectives."

The current economic environment in the United States remains challenging. Our primary products are provided to workers employed by our customers and, as a result, our business prospects are dependent upon levels of employment among other factors. Our revenues are impacted by the opening and closing of locations by our customers and reductions and increases in headcount by our customers. Additionally, voluntary employee turnover has been reduced significantly as a result of fewer alternative jobs available to employees of our customers. Fewer available jobs coupled with less attrition results in decreased demand for our uniforms and service apparel. In an effort to mitigate these factors in the current economic environment, we have implemented the following strategies.

First, we are actively pursuing acquisitions to increase our market share in our image apparel business which consists of uniforms and service apparel.

Second, we diversified our business model by providing remote staffing solutions to other businesses. We entered this business sector to provide remote staffing solutions to the Company at a lower cost in order to improve our own operating results. Our remote staffing operations, located in El Salvador, Costa Rica and Seminole, FL. have enabled us to reduce our operating expenses and to more effectively service our customers’ needs. We began selling remote staffing services to third parties at the end of 2009. We have grown our remote staffing business to third party customers from approximately $120,000 in annual net sales in 2009 to approximately $1 million in net sales in 2010. We generated net sales of approximately $2,162,000 from our remote staffing business in the first nine months of 2011 as compared to $503,000 in the first nine months of 2010. We are aggressively marketing our remote staffing services to third parties and believe that this area will be a strong growth sector for the Company in 2011 and beyond.

Finally, we are pursuing new product lines to enhance our market position in the image apparel business. Toward this end, we entered into a licensing agreement in January of 2011 that provides us with access to patented technology which will allow us to market a new line of image apparel to our customers. Our new line of image apparel is designed to provide our customers with the ability to turn their employee uniforms into point of sale advertisements that will, in turn, give them the ability to generate advertising revenues for their businesses. We believe that this new product line will provide us with the opportunity for significant growth in our image apparel business in the future. We expect to begin generating revenues from this new product line in the fourth quarter of 2011.