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Superior Uniform Group scrubsThe most important takeaway from Superior Uniform Group Inc. (NASDAQ:SGC) strong operating performance for the year ended December 31, 2014 is its organic growth (18.2%) that contributed around $28 million of the year over year revenue increase of 29.5%.  The balance of the growth was from revenues generated by HPI Direct, Inc.  HPI was acquired in July 2013.  As discussed in our recently published article, Superior Uniform Group: An Old Dog That Has Learned New Tricks,  HPI not only brought a robust and growing business to SGC but, perhaps more importantly, a superior selling and marketing machine that is not only driving continue growth for HPI, but for all of SGC’s other businesses.  HPI was once one of SGC’s toughest competitors.  Now the company brings its winning formula to SGC.

Investors should note that SGC did not give forward guidance but the company’s historic organic growth rate has averaged around 6%.  Management now allows that an organic growth rate greater than 8% can be expected.  We believe 8% organic growth is exceedingly conservative.  That’s because two important factors will drive growth going forward:

  • The continued roll out of HPI’s selling and marketing strategies impacting all of SGC’s business lines.
  • Increasingly favorable employment trends, including the voluntary turnover ratio that measures the number of workers quitting for better jobs.  When an employee leaves the replacement worker needs new uniforms.  The voluntary turnover ratio will no doubt increase with Wal-Mart and now other retailers increasing minimum wages for their workers.   Look for far more mobility in the workforce than we’ve seen since the Great Recession began in 2008.

SGC Strong Operating Results

A review of the strong year over year operating results SGC posted for the year ended December 31, 2014:

  • 2014 revenues grew by $45 million or 29.5% over 2013.
  • Net income surged to $11.3 million ($.82 per diluted share) or 90% more than the $5.9 million ($.46 per diluted share) posted in 2013.
  • Q4 2014 revenues of $49.7 million exceeded Q4 2013 by 9.2%.
  • Q4 2014 EPS of $.20 per diluted share was 70.6% more than the $.13 posted in Q4 2013.

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