SPAR Group (NASDAQ:SGRP) reported a narrower strategic focus and improved gross margin in the first quarter of fiscal 2026, as management emphasized a deliberate shift away from lower-margin remodel work toward recurring merchandising services across the United States and Canada.
On the company’s earnings call, Chief Executive Officer William Linnane said SPAR has become “a fundamentally different company” from several years ago, describing it as a North American-focused retail services platform centered on core merchandising and on-demand execution. He said the company’s work in 2025 created “a leaner, more disciplined, margin-focused organization designed to scale with operating leverage.”
Revenue Declines as Gross Margin Improves
Chief Financial Officer Steven Hennen said first-quarter net revenue totaled $30.5 million, down 10.3% from the prior-year period. The decline reflected reduced U.S. remodel work as SPAR continued its shift toward higher-margin recurring merchandising services.
Within the revenue mix, Hennen said U.S. merchandising revenue grew 5% year over year, while Canada revenue increased 3%. Gross profit was $6.8 million, or 22.3% of revenue, compared with $7.3 million, or 21.4% of revenue, in the year-ago quarter.
Linnane said the margin performance reflected the benefits of SPAR’s shift toward higher-margin recurring merchandising revenue supported by a technology-enabled workforce. He reiterated that the company is targeting gross margins of approximately 25% over the next 18 to 24 months.
“Our financial strategy is clear: Drive up gross margins, control SG&A, and grow the top line via recurring revenue streams, all by relentlessly focusing on our core merchandising business,” Linnane said.
Adjusted EBITDA Turns Positive
SPAR’s operating results were roughly breakeven in the quarter, with a small operating loss of $42,000 compared with operating income of $1 million in the prior-year period. GAAP net loss attributable to SPAR Group was $553,000, or $0.02 per diluted share, compared with net income of $462,000, or $0.02 per diluted share, a year earlier.
Adjusted net loss attributable to SPAR was $274,000, or $0.01 per diluted share, compared with adjusted net income of $528,000, or $0.02 per diluted share, in the prior-year period. Consolidated adjusted EBITDA was $737,000, down from $1.5 million a year earlier, but management highlighted the return to positive EBITDA as an important milestone.
Hennen said selling, general and administrative expenses were $6.2 million, compared with $5.9 million in the prior-year quarter. On a normalized basis, excluding out-of-period accrual adjustments, SG&A declined $1.9 million compared with the 2025 quarterly average, and Hennen said management sees additional reduction opportunities.
As of March 31, 2026, SPAR reported $4.3 million in cash and cash equivalents. Hennen said the company had positive working capital of $18 million, excluding the balance owed on its line of credit and the current portion of long-term debt. Net cash used in operating activities was $3.9 million, primarily due to working capital timing associated with growth in the merchandising business.
Management Reiterates Fiscal 2026 Outlook
SPAR reiterated its fiscal 2026 guidance, calling for revenue of $143 million to $151 million, gross margins of approximately 20.5% to 22.5%, and SG&A excluding unusual items of $25.5 million to $26.5 million.
During the question-and-answer portion of the call, Linnane said a “substantial amount” of expected 2026 revenue is already contracted, noting that the company is five months into the year. He said some project work remains forecast-based, while a small portion of revenue is uncommitted. Linnane also said some future revenue could come from SPAR’s partnership with ReposiTrak, though he indicated that contribution would build over time.
Asked about quarterly seasonality, Linnane said the second and third quarters are historically the strongest periods for the U.S. and Canada business. He also said first-quarter revenue was broadly in line with management’s expectations and that second-quarter revenue should be stronger sequentially.
ReposiTrak Partnership and Technology Focus
Linnane highlighted the company’s March partnership with ReposiTrak as an example of SPAR’s strategy to combine technology with field execution. He said artificial intelligence and analytics can identify retail problems, but workers are still needed to resolve issues at the shelf level.
“Retailers and brands do not need more dashboards,” Linnane said. “They need issues resolved, standards maintained, and sales protected.”
He said SPAR’s platform is intended to identify where action is needed and deploy its national on-demand workforce to help keep shelves stocked, stores organized and products merchandised without adding incremental store labor costs. Linnane said the company is also evaluating additional technology and AI-based tools to enhance its offerings.
Nasdaq Compliance and Strategic Alternatives
In response to an investor question about Nasdaq listing requirements related to book net worth or book value, Linnane said SPAR has a plan and expects to communicate with Nasdaq later in the week. He declined to discuss the plan publicly before providing it to Nasdaq but said management believes it is “robust.”
Asked whether a strategic sale remains under consideration after a previous process did not result in a transaction, Linnane said the company is not actively pursuing a sale process or seeking bids. He said management is focused on delivering the business plan and guidance, adding that the company believes the share price will respond to execution.
“We’re focused on the business in hand and delivering the numbers and the guidance,” Linnane said.
About SPAR Group (NASDAQ:SGRP)
SPAR Group, Inc is a U.S.-based provider of retail merchandising and business services to consumer packaged goods companies. Through its nationwide network of local merchandisers, the company delivers in-store product stocking, planogram compliance, retail audits and promotional installations. SPAR Group’s field teams work directly in grocery, pharmacy, big?box and convenience channels to ensure optimal product placement and availability at the point of sale.
Beyond traditional merchandising, SPAR Group offers retail data collection and analytics to help clients monitor shelf conditions, pricing accuracy and inventory levels across multiple retail outlets.
