Gun Sales Plummet

Market analysts backed away from gun makers last week after Smith & Wesson executives slashed the company’s forecasted annual sales by $100 million.

Maksim Netrebov, founder of New Jersey-based Maks Financial Services and contributor at Seeking Alpha, slammed the gun maker’s holding company, American Outdoor Brands, in a Dec. 11 article for evading questions regarding why the lowered guidance came only now — and not a year ago when President Donald Trump’s electoral victory left the industry flush with inventory and short on demand.

“If we are on the Titanic, the Iceberg is now visible, it is too late to stop the ship and the deck chairs are arranged,” he said. “The industry demand is deteriorating both significantly and quickly, the companies bet wrong and are now sitting on massive inventories, even larger manufacturing capacities which they spent billions on, and are playing ‘chicken’ with each other seeing who will blink first and cut their production.”

Those companies — American Outdoor Brands, Vista Outdoor and Sturm, Ruger and Co. — have all reported diminished earnings over the last year, citing a return to seasonal sales patterns after lingering promotions die down, presumably by the year’s end.

As 2018 fast approaches, however, American Outdoor Brands CEO James Debney told investors the rock-bottom pricing will stick around awhile longer — a sentiment echoed by top executives at Vista and Ruger in November.

“We are not yet seeing the recovery that we expected to see,” said Vista Outdoor Chief Financial Officer Stephen Nolan during a conference call with investors Nov. 9. “Shooting sports has always been a cyclical industry with periodic downturns lasting anywhere from 12 to 24 months. While we may not be at the bottom as of yet, we believe that we are very close and we anticipate that the market will show returns to growth over the next 18 months.”

Vista’s second quarter earnings declined 25 percent, according the company’s filing with the Securities and Exchange Commission. Sales likewise dipped 16 percent, the company’s second double digit loss so far this year. Its shooting sports segment generated $296 million, a 19 percent decline over 2016 — the biggest on record for gun sales. Net profit for the segment nosedived 38 percent, Nolan said.

Ruger CEO Chris Killoy told investors last month the 53 percent decline in net profits — and the rest of Ruger’s financial statement, for that matter — proved just how “challenging” the third quarter was for the company, with little reprieve in sight.

“We offered more promotions that were moderately more aggressive than last year, but we did not chase our competitors’ offerings to achieve better short-term results,” he said. “We will continue to take a measured and thoughtful approach to sales promotions and rebate opportunities considering both the short-term benefits and the potential longer term implications both financial and reputational.”

The dismal results come after a strong first quarter for the company, which reported $167.4 million in sales — a 3 percent decline over first quarter 2016. Sales fell more than 35 percent to $104.8 million in the third quarter ending on Sept. 30, according to the company’s earnings reports. Second quarter sales likewise plummeted 22 percent. Overall, Ruger’s gun sales trail last year by nearly 20 percent.

Smith & Wesson’s revised guidance — coupled with a 36 percent decline in second quarter sales — sent its share prices plummeting 14 percent earlier this month.

“The best way I can describe the mood of the call with management and the analysts is as a somber wake up call or an intervention, one where the group admits they have a problem,” Netrebov said of the gun maker’s Dec. 7 conference call with investors. “‘Apparently’ to the management and analysts out there, this worsening of the firearms industry was unexpected.”

“Overall, it was quite clear again that most of the analysts were not ‘gun people’ and it was like vegan cooks asking a butcher to give them an update about the fine meats market,” he added.

Samuel Smith, a research analyst and fellow contributor at Seeking Alpha, admitted the error of his previously “bullish” outlook on gun stocks — even apologizing to readers who may have lost money after taking his advice.

“My personal recommendation is to sell your shares before the end of the year to get a tax write-off and then potentially repurchase as a speculative long-term play if prices dip well into the single digits,” he said. “For myself, I plan to lick my wounds, process my lessons learned, and steer clear of investing in the firearms industry until more clarity is gained on the projected length of the promotional activity. In the meantime, enjoy buying the cheap guns!”

source: guns.com

  • Alibaba

    Yeah, looks like imbecility is incurable… For some it seems guns and butter are something similar – if you need one daily, than you need the other one too!… Bad news Mr Maksim! I may buy butter once a week, but I still can use the 1911 my grandfather gave it to me when I was in my teens!… Not need to buy another one every month.

  • Is that why there was a record number of back ground checks on Black Friday! 🙂

  • John Richmond

    How come prices don’t reflect a flush inventory? We’ve just come thru a time, being gouged on firearms and ammo, with prices remaining artificially high.

    • Daryl

      You are correct and only a few guns have actually come down in price. Look at a Smith & Wesson 6 shot revolver, most are selling for around $700. The Colt Python is no longer made because it was so expensive. Prices on all guns need to come down to where more people can buy them then sells will go back up. Everyone knows Barack Obama was the best gun salesman ever, better than Samuel Colt, but he is not in office so the manufacturers need to understand that as long as prices are too high people will buy cheaper guns or not buy anything.

  • L Cavendish

    So many gun deals…so little extra money…LOL
    I still have a few guns on my want list…and always room for more, of course…l
    Waiting for the right deals.

  • Alan404

    A supposedly 2nd Amendment friendly president and administration might be involved. Also, how many guns can the civilian population absorb?

  • Roger

    Gun control does not work, never has and never will! We already have background checks and they do not work, they never have and never will for one simple reason, criminals don’t obey laws, that is why they are called criminals!
    If a person wants a gun, they will get a gun, if they can’t buy a gun, they will steal one, then who does the background check? How long is the waiting period?
    A well regulated militia, being necessary to the security of a free state, the right of the people (the citizens of any particular state) to keep (own)and bear arms (carry guns of any type and caliber) shall (absolutely) not be infringed!
    The 2nd amendment is crystal clear and only an idiot can’t understand it!

  • dcartmill

    Yes this could be a problem for the arms mfgs’ ,because everyone who wanted a gun now already has two or three. The public can only absorb so many guns. There will be more people that buy ,but not in the quantity as has been seen in the last few years

  • MotorcycleHombre

    good for us