Market Prognosis

A concise summary of the major macro events of the past 24 hours, and selected UK company-specific news.

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November 7, 2023

Cracking the US market isn’t easy

Macro & Overnight

Risk assets couldn’t retain the recovery set in train by last week’s data releases. The strong price action may have been a short covering exercise, after all.

Bond investor focus will be on Fed Chair Powell’s speech tomorrow. Forward markets indicate a 100 bps of rate cuts from the Fed by the end of 2024.

UK saw house prices rise in October, according to Halifax data, as King Charles delivers the King’s Speech to parliament, setting out the UK’s legislative agenda for the run into a likely election year.

UK Company News

4imprint upgrades FY profit guidance by 4%, albeit it sees some evidence of softening demand patterns typical of a more cautious macroeconomic environment. However, a less buoyant economic outlook represents a market share opportunity. It has a cash balance of $95m after funding the H1 dividend ($17.7m) and remains in a solid financial position. 

4imprint is a US-based distribution business relentlessly taking market share in the supply of small-batch promotional products. It manages to operate with little or no working capital, as most of its products are dropped shipped from its suppliers. It has close control over its growth by flexing its marketing spend, allowing it to generate cash in most market conditions. Since the lockdown, 4imprint has enjoyed a growth step change, but if things slow down from here, it can trim its sails accordingly. With minimal market share and a sustainable competitive advantage, this company can continue as a serial compounder for many years to come.     

Naked Wine warned that trading in the US during Q2 and October has been weaker than anticipated, and the CEO is to be replaced by founder and former CEO Rowan Gormley, who steps up as interim Executive Chair. It reported it has £3m net cash and £45m of liquidity through its credit facility. The Group is currently at its lowest point of forecast liquidity and continues to anticipate converting excess inventory to cash over the next 12-18 months, given its materially reduced inventory commitments. However, due to the lowered revenue expectations in the US, the previous destocking timeline has been extended.

Unlike 4imprint, a US native, Naked Wine is another in a long list of UK consumer companies struggling to grow in the US market. Today’s reset sees the return of Rowan Gormley, the founder of Virgin Wines and Naked Wine. Along with his CFO, James Crawford, Gormley was the architect of the merger with and then demerger from Majestic Wine. Now that the band is back together, it is worth seeing what the recovery strategy is. With the shares down sharply again today, it certainly looks like they have left it late. 


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