Weakening demand, particularly from clients in the technology and gig economy markets, contributed to a 15.7% year-over-year decline in sales in the first quarter of 2023 for Top 40 distributor BAMKO (asi/131431).

The Los Angeles-headquartered promotional products firm this week reported that sales for the three months that ended March 31 were $81.85 million, down from nearly $97.1 million the year prior.

Sales of personal protective equipment (PPE), which are included in both of those total quarterly revenue numbers, fell 97% in this year’s Q1 to $121,000 as the COVID-era need for PPE evaporated. The PPE decline contributed to BAMKO’s overall revenue retreat.

“A softening economy and recession fears led to a year-over-year revenue drop of approximately 12%, excluding PPE,” said BAMKO President Jake Himelstein, a member of Counselor’s Power 50 list of promo’s most influential people. “In Q1, we saw many clients, particularly those in the tech space and gig economy, which represent an outsized portion of our customer base, engage in widespread layoffs. As a result, we saw fairly extensive freezes on marketing budgets, delays on marketing spend, and a pause on employee gifting programs.”

Pre-tax income for BAMKO dropped 11.5% year over year in the quarter to about $5.85 million. While the overall sales decline hurt the income tally, BAMKO was able to lower selling, general and administrative expenses and improve gross margins, which rose from 29.1% in Q1 2022 to 31.6% in this year’s first quarter. A favorable shift in the mix of pricing and customers helped propel the improvement, a filing with the U.S. Securities & Exchange Commission indicated.

Despite the challenging start to 2023, BAMKO executives said there are positives to report too.

“While there are doubtless a number of economic headwinds that we’re up against, we are starting to see leading indicators of re-emergent marketing spend,” Himelstein said. “We are buoyed by recent news of very strong Q1 earnings in the tech sector, which typically bodes well for branded merchandise spend.”

Still, Himelstein emphasized that BAMKO isn’t simply waiting for market conditions to improve.

“We are actively focusing on increasing wallet share from our existing client base and the aggressive acquisition of new customers,” he said. “Our RFP pipeline and referral base continues to be strong, and we recently closed some very large program business that will start to deliver revenue in the coming quarters.” 

BAMKO is part of Florida-based parent firm Superior Group of Companies, a publicly traded business. The BAMKO performance, along with a revenue drop in SGC’s healthcare apparel segment, resulted in SGC’s total company sales declining 9% year over year to $130.8 million. SGC’s net income of $888,000, or $0.06 per share, for 2023’s Q1 was down from $5.23 million, or $0.32 per share, in 2022’s first quarter.

“Our team remains focused on winning in the marketplace every day while optimizing our longer-term strategy to capitalize on the large and attractive end-markets we serve,” said CEO Michael Benstock, noting that SGC’s board has approved a quarterly dividend. He said that reflects “our confidence in our continued solid performance during subdued economic times.”

Based on reported 2021 North American promotional product revenue of $215.8 million, BAMKO ranked 11^th on Counselor’s most recent list of the largest distributors in the industry. The new rankings debut in the summer.

In March, BAMKO reported that its 2022 sales increased by 80% year over year to about $388 million. In part, the gain was helped by an integration that centered on bringing the uniform and corporate image apparel business of an SGC-owned company under the BAMKO umbrella in 2022. The 2023 Q1 and 2022 Q1 BAMKO sales performances reflect that integration, the SEC filing indicated.