Top 40 distributor BAMKO (asi/131431) says continued macroeconomic challenges in key end-markets it serves is the overriding reason that sales declined year over year for a second straight quarter.

Despite the revenue slip, the Los Angeles-headquartered firm noted that profitability, as measured by earnings before interest, taxes, depreciation and amortization (EBITDA), ticked up on an annual basis in the second quarter of 2023, which concluded June 30.

Those were among the central takeaways after BAMKO’s publicly traded parent company, Superior Group of Companies (SGC), released Q2 financial results on Monday, Aug. 7.

For BAMKO in particular, Q2 sales tallied $79.6 million, a 22% decline compared to the same April-through-June stretch last year. For the first six months of 2023, BAMKO’s sales were down 19% to $161.4 million. BAMKO’s Q1 sales declined nearly 16%.

“Overall, macroeconomic headwinds in the tech and gig economy market sectors proved challenging in the second quarter,” BAMKO President Jake Himelstein, a member of Counselor’s Power 50 list of promo’s most influential people, told ASI Media.

Himelstein continued: “Our response to these broader market trends has been to improve gross margins, carefully manage expenses and develop new sales strategies designed to overcome the macro environment. Our focus has been to focus on what we can control, with the intent being to position ourselves to capitalize on future growth opportunities as the economy improves over time.”

Sales Down but Profitability Up

For Q2, SGC reported adjusted EBITDA of about $7.4 million (up from $4.8 million the year prior) across all its business divisions, which beyond BAMKO/branded products include healthcare apparel, contact centers and others. BAMKO was the biggest contributor to SGC’s Q2 2023 EBITDA, generating $6.98 million, a rise from Q2 2022’s $6.67 million.

Across SGC, adjusted EBITDA rose in the second quarter of this year compared to last primarily due to a decrease in inventory write-downs, according to the company’s quarterly financial report.

“The thawing-out of marketing spend combined with large tech companies continuing to report strong earnings results bodes well for branded merchandise spend in the quarters to come.” Jake Himelstein, BAMKO

Despite the Q2 increase, EBITDA is down for the first six months of 2023 across SGC, having dropped 3% to $14.33 million. The decrease occurred mainly “due to an increase in contact centers’ selling and administrative expenses and a decrease in branded products net sales, partially offset by a decrease in inventory write-downs,” SGC said in its financial filing.

In Q2, SGC’s total sales declined 12.7% to $129.2 million. For the six-month period, pan-company revenue fell 11% to $259.9 million.

Net income and earnings per share were up, though. For Q2 2023, net income was $1.2 million, or $0.08 per share diluted, while for the half-year it was $2.1 million, or $0.13 per share. SGC sustained losses in the comparable periods in 2022 because of impairment charges related to goodwill and tradenames, the company said. If those charges were taken out of the equation, net income/earnings per share were essentially flat year over year in Q2.

A Better Second Half?

While Himelstein admits it’s been a bumpy start to 2023, he believes the second half could well hold better things for BAMKO.

“One important positive sign is that we are continuing to see marketing budgets open up over the past couple of months,” Himelstein told ASI Media. “The thawing-out of marketing spend combined with large tech companies continuing to report strong earnings results bodes well for branded merchandise spend in the quarters to come.”

BAMKO increased sales 80% in 2022 thanks to a successful integration of another SGC business, contributions from acquisitions and organic growth. Its $387.9 million in 2022 North American promo revenue led to BAMKO ranking eighth on Counselor’s most recent list of the largest distributors in the industry.