Remington Outdoor Company Inc.’s sales gains slowed in the fourth quarter, but it was due to declines in ammunition sales as firearms remained relatively strong.
The news was reported in its just-released 10K. In early March, The Utica Observer-Dispatch reported that Remington had laid off 122 employees at its manufacturing facility in Ilion, NY.
In its filing, Remington attributed the layoffs to “high inventory levels and changes in consumer buying behavior.”
The company said that it in its firearms segment, “we began to see a post-election reduction in demand for modern sporting rifles (MSRs) and handguns beginning in late January 2017.”
The continued weakness being seen in the firearms, ammunition and related accessory product markets were due to:
- Consecutive fall hunting seasons not meeting expectations,
- Overall lower levels of retail traffic, and
- Changes in consumer buying behaviors with focus on value purchases, such as promotional items, opening. price point products and new and innovative products.
“The industry has previously experienced slowdowns in purchasing certain products when consumer expectations of increased legislation subsides,” Remington wrote in its report. “We believe the change in the presidential administration has partially contributed to the industry slowdown in early 2017. These dynamics have led to higher or increasing inventory levels in the market associated with certain hunting and shooting related products.”
The company said it is adjusting to the changed marketing conditions by managing and adjusting channel inventory levels,, purchasing in lower volumes, providing additional promotional activities, and reducing costs associated with production.
“Remington has continued to adjust to the market changes by management costs, adjusting production levels, making selective investments in promotions and introducing new products,” said Remington.
Because the overall handgun category continues to grow, Remington said it has launched the Remington RM380 Micro Pistol as its first introduction into the growing handgun market for self-defense and concealed carry pistols. In July, the newly-enhanced Model R51 concealed carry pistol was introduced.
In a response to the softness in the ammunition segment, Remington launched a number of new UMC range buckets in 380, 9mm, 45 Auto, .223 Rem, and 300 AAC. Remington wrote, “The new full line of American Clay & Field target loads is gaining traction in the market along with five new Express XLR loads. The company’s Barnes brand line continues to answer to premium shooters demands with new products including Barnes Range AR line, the new Barnes Precision Match line, and a full line of international Barnes Vor-TX Euro rifle loads.”
The filing also noted that it carried a receivable balance of approximately $2.8 million tied to the Gander Mountain of $2.8 million on the day it filed for bankruptcy, march 10.
Overall, the 10K showed the company delivered a generally strong fourth quarter to wrap up a turnaround year.
In the fourth quarter, sales improved 4.5 percent to $221.1 million. Firearms sales grew 15.5 percent $117.5 million, offsetting a drop of 9.0 percent in ammunition sales, to $85.4 million. In its consumer segment, which includes on- and off-gun accessories and firearm cleaning supplies, sales grew 13.0 percent to $18.2 million.
On an adjusted basis excluding non-recurring items, EBITDA slipped 1.8 percent to $22.2 million. Operating earnings reached $11.9 million against a profit of $2.5 million. Remington showed a net loss of $200,000 against a net loss of $96.1 ill a year ago.
For 2016, sales increased 7.0 percent to $865.1 million.
Firearms sales were $437.8 million, an increase of $62.6 million, or 16.7 percent. MSR sales increased $34.2 million and shotgun sales increased $16.5 million. Sales of handguns and centerfire rifles increased by $14.0 million and $1.7 million, respectively, and accrued discounts were lower by $0.2 million. These increases were partially offset by lower sales of rimfire rifles of $4.0 million. These increases were primarily due both to increased MSR sales prior to the presidential election and its new handgun product launches.
Ammunition sales were $357.7 million, an increase of $2 million, or 0.6 percent. Sales of centerfire ammunition increased $13.5 million, while sales of shotshell ammunition increased $8.4 million. These increases were partially offset by decreased sales of rimfire ammunition of $9.7 million and decreased sales of other ammunition products and higher accrued discounts of $10.2 million. These changes were primarily driven by increased demand for shooting versus hunting caliber ammunition and promotional products.
Net sales were $69.6 million in its consumer businesses, a decrease of $8.4 million, or 10.7 percent, as compared to the prior-year period. The decrease was primarily due to lower sales of accessories of $11.7 million associated with the divesture of Remington UK and Mountain Khakis, partially offset by higher sales of after-market parts of $3.3 million.
Gross margins improved to 25.5 percent of sales from 23.6 percent. The improvement was due to a climb in firearm’s gross margins to 23.8 percent from 21.4 percent. The increase was due to favorable pricing and lower manufacturing costs.
Operating expenses were reduced to 16.1 percent of sales from 25.3 percent a year ago.
Operating income reached $81.5 million against a loss of $13.9 million a year ago. Net income was $18.9 million against a net loss of $135.2 million in 2015. Adjusted EBITDA improved to $119.80 million form $63.9 million.
Nonrecurring charges of $8.1 million for the year ended December 31, 2016 consisted primarily of $2.6 million of restructuring charges related to the closure of our Mayfield production facility, $2.4 million in other non-recurring fees, $1.8 million of employee related costs, $0.9 million in bank fees and $0.4 million in litigation an lawsuit matters.
Nonrecurring charges of $38.5 million for the year ended December 31, 2015 consisted primarily of $17.7 million of restructuring charges and start-up costs, $10.3 million of employee related costs, $5.3 million in litigation and lawsuit matters, $2.4 million in project and consulting fees, $1.0 million in bank fees, $0.9 million of relocation costs and related tax gross up and a $0.8 million loss on the sale of a subsidiary.
Photo courtesy Remington Arms
