Smith & Wesson Holding Corporation reported a 1.8% dip in overall sales for the fiscal third quarter ended Jan. 31 as slight sales growth from the Firearms segment was more than offset than substantial weakness from its struggling perimeter security businesses.
The company said lower corporate spending and governmental budgetary constraints has had a profound impact on the struggling perimeter security business, prompting management to shrink the division and rebrand the business from its Universal Safety Response name to Smith & Wesson Security Solutions.
Smith & Wesson recorded a $51 million charge from the UCR brand due to the declining value of the business. Net sales for the division fell 37.8% to $10.1 million in fiscal Q3 from $16.2 million in the year-ago period.
Total company net sales slipped 1.8% to $89.3 million from $91.0 million in the prior-year period, reflecting a 6.0% increase in firearms sales partially offsetting the aforementioned drop in perimeter security sales. Gross profit margin was 24.1% of sales in the quarter, compared with 30.0% in the year-ago quarter, due to reduced volumes in perimeter security sales, planned firearm manufacturing consolidation costs relating to Thompson/Center Arms, and a short-term impact in firearms related to increased distributor incentives and strategic price-repositioning initiatives.
SWHC recorded a net loss of $52.8 million, or 88 cents per diluted share, in fiscal Q3, including the impairment charge, versus a net profit of $3.1 million, or 5 cents per diluted share, in the year-ago period.
Firearms segment sales grew 6.0% to $79.2 million from $74.7 million in the year-ago quarter. Management noted that market demand for the company's new firearm products was strong during the quarter. As a result of consumer trends toward small firearms, the company said its product mix shifted to firearms with lower unit prices, resulting in daily production volume that approached record levels near quarter-end. Firearm backlog levels at the end of the third quarter grew to $73.8 million from $32.4 million at the end of the sequential second quarter of fiscal 2011.
Regarding outlook, the company expects total sales for the fourth quarter to be between $108.0 million and $112.0 million. Firearm division sales are anticipated to be between $98.0 million and $100.0 million, with the perimeter security division contributing the balance.
For the full year total sales are forecast between $389.0 million and $393.0 million. Full year firearm division sales are anticipated to be between $339.0 million and $341.0 million, with the perimeter security division contributing $50.0 million to $52.0 million.
