Gun Sales Are Down – Businessweek

Coming off a year of record sales, the gun market is cooling off. And overeager gunmakers are still struggling to dial down their expectations.

In the recent quarter, Smith & Wesson (SWHC) sales dropped 23 percent, to $131.9 million, and profit plunged 45 percent, to $14.6 million, according to a report late yesterday. Long guns and “modern sporting rifles,” in particular, lost favor among shooters, but handguns cooled off as well. Smith & Wesson shares slumped almost 15 percent on the news.

Sturm Ruger (RGR), another force in the industry, had similarly weak numbers at the end of July. Sales for Sturm dropped 13.4 percent, to $153 million, in the latest quarter, while profit slid by almost one-third, to $22.3 million.

The problem, according to both companies, is too many guns. Executives are grousing about “high inventory,” stubborn retail partners, and a glut of guns in such stores as Cabela’s. They are less eager to acknowledge that high inventory in any business comes from only two places: low demand and/or too much supply.

This week, Smith & Wesson’s chief executive, James Debney, went so far as to suggest that stores were just clogged up with the wrong guns—an “unfavorable mix” of “lesser brands and hard to sell products.” Sturm Ruger, meanwhile, took a similar tact, blaming itself for not producing enough cool new firearms.

What the industry really needs is a few lawmakers advocating a gun-control bill. That’s what pushed the gun business to record highs last year in the wake of the Sandy Hook school shootings. Those fears, however, have largely abated, and gun sales have gone with them. Even reports of ammunition shortages are dying off.

The National Shooting Sports Foundation argues that the industry is just returning to “a new normal.” The number of background checks processed by the FBI this year, while way off last year’s pace, still reflects a decade-long rise in gun interest. “The sky certainly is not falling,” Steve Sanetti, CEO of the foundation, said in a statement. “Like a rocket ship, we’ve returned to Earth, but we haven’t gone back in time.”

Meanwhile, gun executives are taking aim at hunting season, their best time of year, while trying to  hold their fire on production. “We’re hitting the brakes, and we have the most desirable products, and we are coming into the busiest season,” Debney at Smith & Wesson said. “I think we are going to be in a great spot.”

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27 August 2014 | 4:03 pm – Source:

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