Smith & Wesson stock crushed as gun demand cools
Smith & Wesson Brands generated $177.7 million in net sales during its third quarter of fiscal 2022, a 31% year-over-year decrease
Shares of Smith & Wesson Brands fell over 12% Friday, capping a weekly loss of 8% as demand for its guns has cooled significantly since the height of the coronavirus pandemic.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| SWBI | SMITH & WESSON BRANDS | 13.25 | +0.26 | +2.00% |
Smith & Wesson Brands generated $177.7 million in net sales during its third quarter of fiscal 2022. The figure marks a decrease of $79.9 million, or 31%, compared to the same period last year, but $50.3 million, or 139.5%, higher than the third quarter in fiscal 2020.
Meanwhile, the company reported a quarterly profit of $30.5 million, or 65 cents per diluted share, compared with $62.3 million, or $1.12 per diluted share, for the same period last year.
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The National Instant Criminal Background Check System reported a record high of 39.7 million firearm background checks in 2020 and 38.9 million firearm background checks in 2021. In the first two months of 2022, approximately 5.15 million background checks for firearms were conducted compared to 7.76 million firearm background checks during the first two months in 2021.
"Although the firearms market remains elevated and healthy with new entrants, it has cooled significantly from the height of the pandemic surge and seems to now be following pre-pandemic historical demand patterns," Smith & Wesson Brands President and CEO Mark Smith said in a statement. "This macro demand pattern is very familiar to us and is exactly what our business model is designed to accommodate."
In this Jan. 19, 2016, file photo, handguns are displayed at the Smith & Wesson booth at the Shooting, Hunting and Outdoor Trade Show in Las Vegas. (AP Photo/John Locher, File)
Smith told analysts on the company's earnings call Friday that there were steeper declines in the long gun category than in handguns. However, there were sharply lower volumes in polymer-frame pistols versus a year ago, partially offset by revolvers, which remain in high demand.
During the quarter, Smith & Wesson Brands launched its M&P chambered 10 mm pistol, a new CSX pistol and its Volunteer rifle series, the next generation of its popular M&P15 rifle line. It also partnered with Vista Outdoor to co-launch a new 30 Super Carry ammunition.
The brand campaigns for the 10 mm M&P reached over 3 million customers in its first day, while the CSX pistol, Volunteer rifle series and 30 Super Carry ammunition reached over 3 million customers during the first week.
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Since March 2020, Smith & Wesson's manufacturing team has increased production by over 82%. The company has also become debt-free after paying down $160 million of debt, has bought back $200 million of stock, paid nearly $20 million in dividends and invested nearly $40 million into its business. The company has over $107 million in cash on its balance sheet.
"Our long-term commitment is to continue to return value to stockholders through regular fixed dividends and share repurchases and, as a result of these accomplishments, we are well positioned to do so," Smith added.
The company's board of directors has authorized an 8-cent per-share quarterly dividend, which will be paid to stockholders of record as of March 17. The payment will be distributed on March 31.