In a Nutshell
*Small, medium-sized and large distributors all reported average revenue increases.
*The Counselor Confidence Index matched its highest quarterly reading of at least the last five years.
Promotional products distributors increased their sales on average by 5.3% in the second quarter of 2018 – the largest such increase in almost four years. Distributors earning more than $1 million in annual revenue produced the biggest gain, with average sales rising by 5.6%. Smaller distributors engineered advances, too. Firms with $250,000 or less in yearly revenue tallied a 5.2% increase, while companies in the $250,001 to $1 million range were up by 4%.
“An economy that has continued to grow, and that has accelerated the pace of growth, has driven strong growth in our industry,” said Marc Simon, CEO of Top 40 distributor HALO Branded Solutions (asi/356000).
Indeed, Q2’s 5.3% upswing in distributor sales bested the moving average of quarterly increases, 3.4%, by nearly two percentage points. The last time a year-over-year quarterly rise topped 5% was in the fourth quarter of 2014, when sales leapt 5.9%.
“The increase in Q2 sales is largely due to the positive business atmosphere, including corporate profits, the tax cut and the overall confidence level,” said Larry Cohen, CEO of Top 40 distributor Axis Promotions (asi/128263). “While we still continue to see some consolidation in certain sectors, the overall economy seems to be on steady ground.”
On the whole, 46% of distributors reported a sales increase in Q2, while 13% said sales declined. Sixty percent of distributors with annual revenue over $1 million reported a revenue rise. Meanwhile, 53% of distributors in the $250,001 to $1 million category reported a gain. Just over one third (36%) of firms in the $250,000 or less range said their sales improved year-over-year.
Notably, the Counselor Confidence Index, which gauges the health and optimism of promo distributors, matched its highest reading in at least the last five years. At 116, the index’s Q2 2018 score was up a point from this year’s Q1 – and up three points from the second quarter of 2017. Between 2013 and the current period, the only other time the index reached as high as 116 was in the first quarter of 2017.
But will the good times continue? Distributors aren’t certain. Trade tariffs, a looming trade war, and global tensions have some a bit leery. “I’m less confident about sales for the rest of the year given the potential impact of inflation and tariffs,” said Cohen. “The uncertainty can frequently cause people and companies to delay investments in their marketing and overall business.”
Simon offered perspective, too. “If the current momentum in the U.S. economy isn’t derailed by tariff wars or geopolitical issues, we should expect the strong growth we’re enjoying to continue,” he said.
Regardless, the executives at HALO and Axis are confident that their companies will thrive in the remaining months of 2018. “Our business is up, and seems to be on a good path for the second half of the year,” said Cohen. “We continue to invest in e-commerce, and are actively hiring.” Said Simon: “HALO continues to experience strong growth throughout our system. Revenue synergy opportunities among HALO operating units has contributed to our organic growth.”