Smith & Wesson: Gun sales decline, but demand is still strong

Firearms manufacturer Smith & Wesson reported its net sales were down 4.6 percent Thursday, while its shares were down about 10 percent Friday. Demand for guns, however, still remains high with the looming possibility of stricter gun laws.

After riding the wave of a booming US gun market over the past few years, firearms manufacturer Smith & Wesson reported disappointing fourth quarter earnings Thursday. The news sent Smith & Wesson shares sliding Friday morning. 

The Springfield, Mass.-based company's net sales were $170.4 million, a decline of 4.6 percent compared to fourth quarter last year, according to the gunmaker’s press release. Shares slipped 12 percent in premarket trading, and were down 10.35 percent at noon Friday.

Smith & Wesson anticipates net sales for fiscal year 2015 will be between $585 million and $600 million. A Thompson Reuters survey showed that analysts anticipated net sales to be $622 million, according to the Wall Street Journal.

Does this mean the gun industry is in decline after years of robust growth? Hardly. Handgun sales were strong, Smith & Wesson reported, though long gun sales had declined.

The company's stock value, too, is on the rise. This time last year, the gunmaker’s stocks were $9.87 a share, while shares were under $3 in August 2011. Earlier this month, Smith & Wesson peaked at about $17 a share and now hovers around $15.

“We are very pleased with our record results for fiscal 2014, which include the highest sales, gross margin, and profits in the company's history,” Smith & Wesson chief executive officer James Debney says in the press release. “Our successful performance was driven by robust consumer demand for our products, combined with carefully managed increases in our manufacturing capacity.”

Demand for guns have been increasing in recent years for two reasons – politics and mass shootings. Guns sales spiked in 2008 and 2012 following US President Barack Obama’s elections, as the Monitor has reported in 2013. Why? In fear of new restrictions, more people purchase guns sooner rather than later. President Obama has pushed for more laws on gun control throughout his presidency,

Gun sales also tend to spike shortly after mass shootings. After the Sandy Hook shooting in late 2012, gun sales set records in several states, the Monitor reported in 2013. In Colorado, requests for background checks rose 41 percent after the Aurora movie theater shooting, and similar spikes have occurred after other shootings.

Sturm, Ruger & Company, another publicly traded gun manufacturer, has seen similar financial patterns after its stocks and sales peaked. Last month, Sturm, Ruger & Company reported net sales of $169.9 million in the first quarter of 2014, compared with net sales of $155.9 million in the first quarter of 2013. The company's stocks were slightly down Friday to $60 a share, after peaking at almost $85 in January.