Smith & Wesson owner sees weak gun sales in year ahead
American Outdoor Brands, the parent company of gun maker Smith & Wesson, reported stronger fourth-quarter earnings and revenue than Wall Street expected Wednesday, although consumer demand for firearms remained soft.
During the company’s quarterly earnings call with analysts, CEO James Debney said background check data for the three-month period appeared to show a small surge in buying activity. However, comparable sales slowed down at the end of American Outdoor Brands’ fiscal fourth quarter, which closed April 30.
“When you come out of periods of robust buying, you can expect a correction,” Debney said, adding that a turnaround in the consumer firearms market typically takes up to two years.
Gun manufacturers such as American Outdoor Brands and Sturm, Ruger & Co. benefited from record U.S. gun sales during President Barack Obama’s tenure in the White House, a time when buyers feared that lawmakers would pass new gun-control regulations. Demand also accelerated before the 2016 presidential election, but President Donald Trump’s victory has contributed to a weaker period for the gun industry.
While there was some “fear-based buying” during the latest quarter, American Outdoor Brands doesn’t expect retailers and other sellers to rebuild inventories in the near term, Debney said.
“In the long term, we do believe [the consumer market] will return to growth,” he added.
Executives also noted that any uptick in demand heading into the midterm congressional elections in November would be a positive for the company’s sales.
American Outdoor Brands, which also owns accessory businesses such as laser sight maker Crimson Trace, expects to book sales of $570 million to $600 million in fiscal 2019. That fell short of analysts’ estimate of about $613 million. Earnings are projected to hit 40 cents to 50 cents a share on an adjusted basis, while analysts were looking for 59 cents.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| AOBC | NO DATA AVAILABLE | - | - | - |
| RGR | STURM RUGER & CO. INC. | 37.97 | +0.47 | +1.24% |
The company reported nearly $607 million in net sales for the full year, down 33% from the previous fiscal year.
The Springfield, Massachusetts-based gun maker said its fourth-quarter profit fell to $7.7 million from $27.7 million. Excluding one-time items, adjusted earnings per share slipped to 24 cents but still beat expectations for 10 cents.
Net sales for the quarter were down 25% at $172 million. Wall Street expected a weaker result of $165.6 million.
Shares of American Outdoor Brands dropped 4.8% in after-hours trading.