SPAR Group (NASDAQ:SGRP) reported a return to profitability in the second quarter of 2026, as the company continued to shift its service mix toward recurring merchandising programs and away from lower-margin remodeling work.
Chief Executive Officer William Linnane said the quarter marked an important point in the company’s transformation efforts. “We returned to profitability for the first time since the first quarter of 2025,” Linnane said, adding that adjusted EBITDA increased more than 60% from the prior-year period and gross margins remained above 22%.
Revenue Declines as SPAR Reduces Remodel Activity
Second-quarter net revenue totaled $36.9 million, down 4.5% from the prior-year quarter. Chief Financial Officer Steven Hennen attributed the decline primarily to lower volume in the remodel business.
Management said the lower revenue reflects an intentional shift toward merchandising services, which it views as more recurring and margin-enhancing than certain remodeling projects. Linnane said both SPAR’s core U.S. merchandising business and its Canadian operations recorded sales growth during the quarter, while the decline was concentrated in remodel activity.
During the question-and-answer session, Linnane said SPAR’s revised revenue outlook was not caused by lost merchandising business. Instead, he said the company has made choices about remodel markets where returns did not justify the working capital required.
“It’s purely a decline in the remodel business related to choices we’ve made around markets where we can really earn margins that make sense for us relative to the working capital we’re tying up,” Linnane said.
Margins and Earnings Improve
Gross profit was $8.4 million, or 22.8% of revenue, compared with $9.1 million, or 23.5% of revenue, in the prior-year quarter. Hennen said gross margins have been supported by the company’s shift toward merchandising work that combines workforce expertise with technology-based tools.
Selling, general and administrative expenses declined to $6.8 million from $7.9 million in the prior-year period. The second-quarter figure included $543,000 of nonrecurring or one-time costs.
Operating income rose to $1.2 million from $715,000 a year earlier. GAAP net income attributable to SPAR Group was $409,000, or $0.02 per diluted share, compared with break-even results in the prior quarter.
Adjusted net income attributable to SPAR Group was $838,000, or $0.04 per diluted share, compared with $151,000, or $0.01 per diluted share, in the prior-year period. Consolidated adjusted EBITDA increased 63% to $2.1 million from $1.3 million a year earlier.
Linnane said the company expects gross margins to remain in the low-20% range and believes it has a path toward margins of approximately 25% over time through a more favorable revenue mix, productivity initiatives and greater scale.
Balance Sheet, Outlook and Cost Targets
As of June 30, SPAR reported positive working capital of $25.8 million, excluding the balance owed on its line of credit and the current portion of long-term debt. Cash and cash equivalents were $2.9 million.
Net cash used in operating activities was $8.7 million during the quarter, which Hennen said primarily reflected working-capital timing associated with growth in the merchandising business.
SPAR revised its full-year 2026 outlook to reflect its focus on merchandising and expectations for lower remodel activity. The company now expects:
- Net revenue of $130 million to $138 million, compared with $136 million in U.S. and Canadian revenue during 2025.
- Gross margins of 21.5% to 23.5%, compared with 15.9% in 2025 for the U.S. and Canada.
- SG&A expense, excluding unusual items, of $21 million to $24 million, compared with $32.2 million in 2025.
Management said it expects the underlying annual SG&A run rate to trend toward approximately $20 million as restructuring actions are anniversary and the company operates with a leaner model. In response to an analyst question, Linnane said the company was trending toward the lower end of its 2026 SG&A guidance range as it approaches the end of the year and moves into 2027.
Technology Initiatives With ReposiTrak
Linnane said SPAR is pursuing an outcome-based model that combines technology, data and in-store execution. The company aims to help retailers improve inventory visibility, replenishment and store performance through real-time insights and a flexible workforce.
SPAR has also been working with ReposiTrak on a scan-based trading proposition for retailers and consumer brands, according to Linnane. In addition, SPAR has begun replatforming its technology capabilities by using ReposiTrak’s retail technology expertise.
Asked about an IT agreement with ReposiTrak, Linnane said the company is working with the retail technology provider to replatform its technology and sees significant potential benefits from that effort.
Regarding the Nasdaq delisting, Linnane said the company considered the compliance costs associated with remaining listed relative to its size, while noting that shareholders made the final decision and SPAR had limited grounds to appeal. He described the OTCQB as the next-best market for the company.
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.
