Industrial, corporate and municipal clients need clean restaurant kitchens, hospitals wards and schools regardless of the economic trends.
“The nature of our customer base and our product lines is that people still sanitize the areas where they prepare their foods, they still wash their hands and they’re maintaining their older vehicles,” Morgan said.
The H1N1 influenza scare also helped drive sales in the retail channel which Zep has spent the last couple of years beefing up as it expanded beyond direct sales to business customers through its “Zep Rep” sales force.
Zep swung to profitability in its fiscal first quarter, posting a profit of $5.4 million, or 25 cents per share, compared with a loss of $1.5 million, or 7 cents a share, in the same period a year earlier.
Though sales slipped roughly 2 percent in the quarter, the decline was partly offset by favorable currency conversions into the U.S. dollar from international sales, price increases on some products and double-digit growth in retail.
The company’s shares, however, fell 9 percent in 2009. That’s as the S&P 600 Smallcap and S&P Materials indices rose more than 25 and 48 percent, respectively last year.
That’s why the company has been particularly aggressive with its retail focus and searching for potential acquisition targets.
On Monday, the company bought Amrep Inc. for about $64.4 million. Amrep specializes in chemical formulations aimed at the automotive, fleet vehicle maintenance and motorcycle segments.
Zep executives say the company is looking to buy firms whose business would complement its products and boost its retail presence.
Zep also has an agreement with Advance Auto Parts to sell several Zep professional and industrial strength products through its more than 3,400 stores and Web site.
These moves, the company says will help grow market share in a very fractured, multi-billion dollar industry, with few national competitors. Zep’s market share is about three percent.
“We operate in a sizable industry that grows at the rate of GDP,” Morgan said. “Looking at the fragmented nature of our industry, growth and acquisition in related businesses, you really create better value for shareholders.”