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Stran & Co.'s Sales Soar But Costs Lead to Q2 Loss

The Top 40 distributor said second-quarter revenue hit a record. Despite the bottom-line loss, the firm expects a return to strong profitability.

Stran & Company (asi/337725) generated sales of $14.8 million in the second quarter of 2022 – a 72.5% increase over the same period the prior year and a record for the Quincy, MA-headquartered Top 40 promotional products distributor.

Gross profit also accelerated, rising from $2.14 million in Q2 2021 to nearly $3.8 million in this year’s second quarter.

Andy Shape

Andy Shape, CEO of Stran

Still, Stran recorded a net loss of about $447,000, or -$0.02 per basic share, in 2022’s Q2. The company said the loss was a repercussion of integration expenses related to the January 2022 acquisition of distributor G.A.P. Promotions’ (asi/199882) assets, ongoing expenses related to being a public company, and heftier purchase costs.

The strong topline sales resulted from higher spending from existing clients. Adding new customers also helped propel the revenue gain, as did business from G.A.P. Promotions, which has now been fully integrated with Stran.

“Importantly, on an organic basis, our year-over-year revenue increased 49.4%, reinforcing our traction in the market,” said Stran CEO Andy Shape. “We remain committed to our business growth strategy involving expansion of our geographic footprint, entering new verticals and opportunistic acquisitions that complement our existing platform.”

Industry-wide, distributors increased sales, on average, by 13.5% year over year in the second quarter of 2022, according to the just-released ASI Distributor Quarterly Sales Survey.

During the first six months of 2022, Stran’s total sales increased nearly 68% relative to the half-year in 2021, reaching $27 million. Over the first two quarters of this year, Stran posted an after-tax loss of $993,257, or -$0.05 per basic share.

Nonetheless, as the company works through integration expenses and other new costs, such as those associated with being a public company, which it became in November last year, executives expect a return to strong profitability.

“Overall, we have maintained a solid balance sheet with over $28 million of cash and cash equivalents as of June 30, 2022, which provides us significant resources to execute on our business growth strategy and establish Stran as a preeminent force in the promotional products industry,” said Shape.

Stran & Co.’s profile in promo has been on the rise. In this Promo Insiders podcast, CEO Andy Shape discusses becoming a publicly traded company, acquisitions, the future of the industry and more.

The strategy includes a continued focus on acquisitions. In June, Stran announced that it’s acquiring Tomball, TX-based Trend Brand Solutions (asi/346428). More such purchases could follow.

“As we work toward realizing our M&A goals, we expect to increase our customer base, grow our capabilities within the beverage space, and expand our geographic presence within the United States,” said Shape. “Given the fragmented nature of the industry, we believe that our strategy of acquiring under-valued and accretive businesses will remain a key aspect of our strategy, bringing together innovation, relationships, and top-tier talent.”

With reported 2021 North American promo product revenue of $47.3 million, Stran & Co. ranked 34th on Counselor’s most recent list of the largest distributors in the industry.