Resources Connection (RGP) is Trying to Mitigate the Revenue Decline by Cost Reduction

In its first-quarter 2026 capitalist letter, Palm Valley Capital Fund highlighted stocks similar Resources Connection, Inc. (NASDAQ:RGP). Resources Connection, Inc. (NASDAQ:RGP) is simply a planetary consulting and nonrecreational services supplier to concern customers. On April 8, 2026, Resources Connection, Inc. (NASDAQ:RGP) closed astatine $3.52 per share. One-month instrumentality of Resources Connection, Inc. (NASDAQ:RGP) was -0.28%, and its shares mislaid 33.58% implicit the past 52 weeks. Resources Connection, Inc. (NASDAQ:RGP) has a marketplace capitalization of astir $117.93 million.

Palm Valley Capital Fund stated the pursuing regarding Resources Connection, Inc. (NASDAQ:RGP) successful its Q1 2026 capitalist letter:

"Two of the different apical quarterly Fund detractors were Resources Connection, Inc. (NASDAQ:RGP) and Flowers Foods (ticker: FLO). RGP has been incapable to stem gross declines, which the steadfast has mitigated done assertive outgo reductions. The effect has been meager, but positive, earnings. During its January net report, the institution officially acknowledged AI unit for the archetypal time, citing “reduced request successful accepted concern roles arsenic clients progressively follow artificial quality and automation.” The absorption of Robert Half, different Palm Valley staffing holding concentrated successful finance, claims the opposite— that AI is not appreciably impacting its business. While it’s imaginable RGP is AI washing its underperformance, the marketplace has rendered a harsh judgment, with shares trading for 1.5x currency and little than RGP’s mean yearly operating nett for astir years anterior to 2025.

When we archetypal established portfolio vulnerability to the staffing sector, the occupation was intelligibly cyclical, with COVID implicit hiring suppressing consequent impermanent labour demand. However, galore investors present person structural concerns. Our staffers service assorted industries, and some, similar RGP, person much perceived AI exposure. Yet adjacent successful industries wherever AI negatively impacts employment, the request for staffing tin persist. Disruption tends to summation labour uncertainty alternatively than simply reducing labour demand. As occupation requirements displacement and readying horizons shorten, companies could go much reliant connected flexible, impermanent labour to negociate that uncertainty, which cements the relevance of staffing firms adjacent successful a brushed employment backdrop. U.S. staffing revenues person inflected higher, precise modestly, successful aboriginal 2026, aft 3 years of manufacture declines. Although it has go much hard to pinpoint normalized request for the staffing space, the shares of respective manufacture participants similar RGP are pricing successful a imperishable impairment. We’re assuming immoderate mean reversion."