Smith & Wesson posted disappointing earnings and a weak forecast for one simple reason: Americans are buying fewer guns.
Shares of the gunmaker plunged 12% in premarket trading Friday as it dawned on investors that the once high-flying gun industry is coming down to Earth.
The gun industry has experienced an intense run-up in demand over the last couple years, fueled by concerns of more rigorous gun restrictions in the wake of President Obama’s reelection and a series of mass shootings including the Sandy Hook massacre in Newtown, Conn.
Gun enthusiasts stockpiled the military-style semiautomatic rifles that are often referred to as assault rifles, exhausting the supply and driving up the prices. But Obama failed to get a bill through Congress that would have placed restrictions on these guns, alleviating concerns that they would be hard to come by.
But there are still signs of growth. Smith & Wesson recently reported a hefty increase in handgun sales, buoyed by growing consumer interest in self-defense and concealed carry.
“Compact guns and polymer guns are selling really well,” said Brian Ruttenbur, gun analyst for CRT Capital. “They are ramping up production dramatically.”
Ruttenbur said that Smith & Wesson’s latest line of M&P compact pistols is so popular that supply is running thin.
“You can’t find an M&P gun on the shelf,” he said. “This is their competitor to Glock.”
For the fourth quarter, Smith & Wesson (SWHC) reported a decline in net sales of more than 4% to $170 million and a 13% drop in income from continuing operations to about $25 million.
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SOURCE: Aaron Smith
CNN
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