Superior Group of Companies (SGC) Risk Analysis

We base our current and future inventory needs and expense levels on our operating forecasts and estimates of future demand. To ensure adequate inventory supply, we must be able to forecast inventory needs and expenses and place orders sufficiently in advance with our suppliers and manufacturers, based on our estimates of future demand for particular products. Our ability to forecast demand for our products has from time to time been and will continue to be affected by various factors, including unanticipated changes in general market conditions, economic conditions, or consumer confidence in future economic conditions. Failure to accurately forecast demand may result in inefficient inventory supply or increased costs. In addition, if we experience increased volatility in shipping times from our suppliers and manufacturers and/or production disruptions, we may experience a shortage of products available for sale. Alternatively, if we advance the timing of inventory shipments to mitigate perceived freight transit time volatility or experience sales below our expectations, we may experience excess inventory levels. Inventory levels in excess of customer demand may also result in inventory write-downs or write-offs and the sale of excess inventory at discounted prices, which would cause our gross margin to suffer and could impair the strength and premium nature of our brands. Further, lower than forecasted demand could result in excess manufacturing capacity, reduced manufacturing efficiencies and/or excess inventories purchased from third parties, which could result in lower margins. Conversely, if we underestimate customer demand, our suppliers and manufacturers may not be able to deliver products to meet our requirements or we may be subject to higher production or shipping costs in order to secure the necessary production. An inability to meet customer demand or delays in the delivery of our products to our customers could result in reputational harm and damaged customer relationships and have an adverse effect on our business, financial condition and results of operations.

Our Contact Centers business and growth within that segment depend in large part on the industry trend toward outsourced customer contact management services. There can be no assurance that this trend will continue, as organizations may elect to perform such services themselves. A significant change in this trend could have a material adverse effect on our business, financial condition and results of operations. We also compete with companies that utilize emerging technologies and assets, such as artificial intelligence and chatbots. These competitors may offer products and services that may, among other things, provide automated alternatives to the services that we provide in the marketplace or otherwise change the way that contact centers engage so as to make our outsourced customer contract management solution less attractive to existing and potential customers or less profitable. We may face increased competition from these competitors as they mature and expand their capabilities.

Our operations rely heavily on our employees, and any labor shortage, disruption or stoppage caused by poor relations with our employees could reduce our operating margins and income. While we believe that our employee relations are good, and very few of our employees are currently subject to collective bargaining agreements, unions have traditionally been active in the U.S. apparel industry. Our workforce has been subject to union organization efforts from time to time, and we could be subject to future unionization efforts as our operations expand or change. Unionization of our workforce could increase our operating costs or constrain our operating flexibility.

We have entered into agreements with manufacturers in which we make payments for raw materials and services in advance of the shipment and delivery of finished products. In the event that advance payments are made to manufacturers that do not have the ability to satisfy their contractual obligations due to their financial instability, geopolitical unrest or other factors, we may incur unrecoverable losses which could have a material adverse effect on our business, results of operations and financial condition.

Economic and political events in recent years have altered the landscape in which we and other U.S. companies operate in a variety of ways. Inflation and interest rates remain high despite recent abatements. World events, such as the Russian invasion of Ukraine and the resulting economic sanctions, have impacted the global economy, including by exacerbating inflationary and other pressures. In addition, the joint U.S.-Israeli strikes on Iran in February 2026, as well as other conflicts in the Middle East, could lead to higher oil prices, create supply imbalances in the global markets for oil and natural gas, and have other adverse effects on the global economy. Both of these crises have potentially far-reaching impacts on energy and food markets and global trade. Conflicts in the Middle East, prolonged inflationary conditions, supply imbalances of oil and natural gas, high and/or increased interest rates, additional sanctions or retaliatory measures related to the Russia-Ukraine crisis or the U.S.-Israeli - Iran crisis, or other situations, could further negatively affect U.S. and international commerce and exacerbate or prolong the period of high energy prices. At this time, the extent and duration of these economic and political events and their effects on the economy and the Company are impossible to predict, but the impact on the Company's business could be material.

Our Healthcare Apparel segment relies on our manufacturing facilities and warehouses in Haiti for the manufacturing and storage of finished goods. Our manufacturing facilities and warehouses may be damaged or our ability to use or access them may be disrupted as a result of civil unrest or other occurrences in Haiti. Such events may interfere with our manufacturing processes, information systems, telecommunication services, and product delivery for sustained periods and may also make it difficult or impossible for employees to reach our business locations. Damage or destruction that interrupts our manufacturing facilities could adversely affect our reputation, our relationships with our customers, our leadership team's ability to administer and supervise our business, and/or cause us to incur substantial additional expenditures to repair or replace damaged equipment or facilities or commence production at alternate locations. While we currently have commercial liability insurance, our insurance coverage may not be sufficient. Prolonged disruption of our manufacturing processes in Haiti also may entitle some of our customers to amend or terminate their contracts with us. Worsening conditions in Haiti may also result in the displacement of native Haitians looking for refuge in neighboring Dominican Republic, which may result in the closure of roads and port access which may limit or restrict our normal and recurring business in Haiti. Any of the above factors may adversely affect our business, results of operations and financial condition.

Our operations are subject to various international trade agreements, regulations and preferences, such as the Dominican Republic–Central America Free Trade Agreement (CAFTA-DR), Caribbean Basin Trade Partnership Act (CBTPA), Haitian Hemispheric Opportunity through Partnership Encouragement Act, as amended (HOPE), the Food Conservation and Energy Act of 2008 (HOPE II), the Haiti Economic Lift Program of 2010 (HELP), the African Growth and Opportunity Act (AGOA), the Middle East Free Trade Area Initiative (MEFTA) and the activities and regulations of the World Trade Organization (WTO).   Generally, these trade agreements, regulations and preferences benefit our business, but trade agreements and regulations can also impose requirements that have a material adverse effect on our business, revenue and results of operations, such as limiting the countries from which we can purchase raw materials, limiting the products that qualify as duty free, and setting quotas, duties and/or tariffs on products that may be imported into the United States from a particular country. To the extent trade agreements benefit our business, we can give no assurances that these benefits will continue to the same extent or at all.  The African Growth and Opportunity Act (AGOA), Haitian Hemispheric Opportunity through Partnership Encouragement Act (HOPE) and Haiti Economic Lift Program of 2010 (HELP) expired on September 30, 2025 and in February 2026 were retroactively extended until December 31, 2026. If these or other agreements and/or preferences with respect to countries in which we operate are not renewed and/or extended, if these or other agreements and/or preferences are changed, or if limits or restrictions under such agreements or regulations are expanded, the cost of continuing to do business in these countries could materially and adversely impact our results of operations, financial position and cash flows. In addition, beginning in the second quarter of 2025, significant new and expanded tariffs, reciprocal tariffs and other trade restrictions were imposed by the United States, with selective tariff exemptions, impacting global trade.  We purchase or manufacture our products largely in Haiti, China, Madagascar, Vietnam, Pakistan and Bangladesh.   The introduction, expansion or continuation of U.S. tariffs on countries from which we source and/or manufacture products, such as China and Vietnam, could have a material adverse impact on our results of operations, financial position and cash flows. In response, in part, to tariffs levied on products imported from China we have shifted some production, and may seek to shift additional production, out of China, which may result in additional costs and disruption to our operations. Furthermore, certain inbound products in our Branded Products and Healthcare Apparel segments are subject to tariffs assessed on the manufactured cost of goods at the time of import. As a result, we have increased our prices for certain products and may be required to raise those prices further, or raise our prices on other products, which may result in the loss of customers and harm our operating performance. More generally, if the imposition of or change in tariffs, duties, quotas, regulations or other restrictions, or if the expiration or change of trade agreements or preferences, involving the United States and countries in which our products are manufactured or into which they are imported, increases our costs, and we are unable to share the cost increases with our suppliers or third-party manufacturers or pass along the remaining cost increases to our customers, our results of operations, financial position and/or cash flows may be materially adversely affected.  As a result, we may decide to move sourcing and/or manufacturing from the affected countries to countries with more favorable cost structures, which such a move may result in material costs and disrupt our operations.