4Imprint (LSE: FOUR) is a direct marketer of promotional products in the US, Canada, UK and Ireland with an extensive product range. It is worth £1.55bn. North America accounts for 98% of sales. Innovative marketing and excellent customer service allow the company to introduce millions of customers to tens of thousands of customised products.
Typical products include banners and giveaways for trade shows, personalised bags, lanyards, mugs, clothing (T-shirts, hats, jackets), umbrellas, pens, notebooks, personalised sticker rolls, desk ware, USB drives, phone chargers and tins of goodies (sweets, mints, popcorn). Products are often from well-known brands but 4Imprint has developed several in-house brands to fill specific gaps within categories such as bags, drinkware and notebooks.
The promotional products market is very fragmented but 4Imprint has gained market share over the years and is now thought to be the leader, with more than 5% of a fragmented North American sector estimated at $26bn. That illustrates the company’s potential for further growth through market share gains. Its excellent customer service and delivery promise have helped it flourish. For example, if the customer finds within 30 days that they could obtain the products more cheaply elsewhere, 4Imprint will refund double the price difference. Furthermore, free samples or artwork are provided to prospective customers who can place orders either online or by phone.
MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Most orders are “drop-shipped” directly to customers from suppliers and this helps speed up delivery. It also means that 4Imprint carries low inventory, which gives it a high return on capital, a key gauge of profitability, of around 82%.
Why 4Imprint is gaining popularity
4Imprint has more than 1.1 million monthly online visits, many more than its major competitors such as discountmugs.com with 260,000 visits. The group’s marketing strategy includes customer retention campaigns; digital marketing using search engine optimisation (SEO), accounting for about half of all its website visits; and paid digital advertising and TV advertising (typically 10,000 airings per month).
4Imprint has a diverse set of customers, ranging from most Fortune 500 companies to family businesses and spanning government organisations, churches and schools, major universities and hospitals. Promotional products are used for sales and marketing campaigns, recruitment activities, employee recognition programmes, and health and safety initiatives. 4Imprint regards individuals placing orders as its primary customers rather than their organisations. Targeting these order placers is proving effective – 75% of all 2023 orders were from existing customers.
CEO Kevin Lyons-Tarr was promoted internally to group CEO in 2015. Sales grew from $49m in 2002 to $1.33bn in 2023, a compound annual growth rate of 16.9%. This growth has been almost entirely organic. There was an inevitable dip in sales in 2020 and 2021 owing to the pandemic, but by 2022 sales were up to $1.14bn, compared with $0.86bn in 2019. 4Imprint is a capital-light business that achieved a relatively high operating profit margin of 10.3% in 2023.
A North American promotional products industry body noted that the promotional products market was essentially flat in the first half of 2024. This reflected economic caution because of the US Federal Reserve’s decision not to cut interest rates in the first half, fears of a potential recession and ongoing geopolitical instability. 4Imprint’s 5% revenue growth for the first half compared with the same period in 2023 therefore represented gains in market share.
Buy 4Imprint to ride the US rebound
4Imprint’s 2023 results showed orders up 12% from 2022, revenue up 16% to $1.33bn, operating profit up 32% to $136.2m and pre-tax profit up 36% to $140.7m. The balance sheet on 31 December 2023 showed net cash of $104.5m, up 20.4%. The dividend was raised by 34% to $2.15 per share.
The interim results for the first half of 2024 were released in August and showed revenue up 5% to $667.5m, which given the flat promotional-products market means 4Imprint gained market share.
Operating profit was up 10% to $69.9m and pre-tax profit was up 11% to $73m. Net cash on 30 June was up 63% year on year to $121.5m. Total orders in the first half were up 3.6%, while 145,000 new customers were acquired.
A trading statement on 12 November confirmed that full-year group profit at just over $150m would meet analysts’ forecasts, with revenue expected to hit $1.37bn. Net cash on 31 October was $137m. Total order value was 4% above the same period in 2023.
The company has grown dividends strongly since 2019, with the 2023 dividend totalling more than ten times the 20.5p paid in 2019. But no dividend was paid in 2020, showing that 4Imprint will not sacrifice growth initiatives or cash balances in hard times.
Expenditure on promotional products is partly discretionary for many organisations, so the market tends to be flat or shrinking in difficult economic times. However, the International Monetary Fund predicts US GDP growth of 2.8% in 2024 and 2.2% in 2025. Reuters expects interest rates to reach between 3% and 3.25% by the end of 2025.
Given this outlook and 4Imprint’s proven ability to take market share, 4Imprint should enjoy further expansion. Net cash of $137m, a forward dividend yield of 3.6% and a forward price/earnings (p/e) ratio of 15.3 make this a sensible entry point to await the upturn.
This article was first published in MoneyWeek's magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.
-
Rightmove: Asking prices set to rise 2% in 2026 after post-Budget market reboundBuyers and sellers who held off in anticipation of the Budget will come back to the market and contribute to asking prices increasing next year, according to Rightmove
-
Coreweave is on borrowed timeAI infrastructure firm Coreweave is heading for trouble and is absurdly pricey, says Matthew Partridge
-
Coreweave is on borrowed time
AI infrastructure firm Coreweave is heading for trouble and is absurdly pricey, says Matthew Partridge
-
Renewable energy funds are stuck between a ROC and a hard placeRenewable energy funds were hit hard by the government’s subsidy changes, but they have only themselves to blame for their failure to build trust with investors
-
Profit from document shredding with RestoreRestore operates in a niche, but essential market. The business has exciting potential over the coming years, says Rupert Hargreaves
-
The war dividend – how to invest in defence stocks as the world arms upWestern governments are back on a war footing. Investors should be prepared, too, says Jamie Ward
-
Literacy Capital: A trust where great returns fund a good causeThere’s plenty to like about specialist private-equity trust Literacy Capital, says Max King
-
An AI bust could hit private credit – could it cause a financial crisis?Opinion Private credit is playing a key role in funding data centres. It may be the first to take the hit if the AI boom ends, says Cris Sholto Heaton
-
8 of the best ski chalets for sale nowThe best ski chalets on the market – from a traditional Alpine-style chalet in Switzerland to an award-winning Modernist building in Japan’s exclusive ski areas
-
Did COP30 achieve anything to tackle climate change?The COP30 summit was a failure. But the world is going green regardless, says Simon Wilson
