Analysts predicted gun sales for firearm companies would slow as the “Obama-factor” subsided, but record-setting firearms sales driven by handguns and tactical rifles at Smith & Wesson indicates that firearms owners still fear a government-driven crackdown on weapons — at least those of the non-hunting variety.
Revenues for the company’s Firearms segment were $99.6 million for the fiscal period ended July 31, up about 26% from sales of $78.5 a year ago. Growth was driven by a 28% surge in sales from the consumer channel, which continues to purchase handguns and “black guns” amidst speculation that these segments will be the first to go should firearms get more regulation. Tactical rifle sales jumped an astounding 347% for the quarter while new product offering in the company’s Classic Series of handguns boosted sales within the premium product lines by 22.3%.
First quarter revenues also included $2.7 million generated from the company’s recent acquisition of Universal Safety Response, a manufacturer of perimeter safety equipment.
Gross margins in the firearms segment improved to 35.3% of net sales from 31.7% in Q2 last year. The company said the increased production and sales of handguns and tactical rifles and improved overhead absorption at its Springfield factory along with greater efficiencies and cost reductions at its New Hampshire factory were enough to positively influence total corporate margins.
Operating income in the Firearms segment was $16.5 million, or 16.5% of sales, almost triple the operating income of $5.7 million, or 7.3% of sales in Q1 last year. This increase was driven by higher sales and corresponding gross profit, as well as by the reduced spending.
The company’s Hunting products, which has been the most susceptible category with regards to the economy, fell 30.1% on a 19% decline from black powder firearms.
While consumer sales account for most of Firearms revenues, management for SWHC said it would be the remaining channels law enforcement, the federal government and international- that will “lessen [the] future sensitivity to swings in the marketplace.” Sales to the company’s Law Enforcement channel grew by 32% in the quarter, boosted by strength from the M&P pistols and tactical rifles.
Federal government sales grew by 3% over the prior quarter, as there were no substantial new contracts issued. International sales grew by 12%, and included firearm shipments to law enforcement agencies in Mumbai, India, South Korea, and Mexico.
Regarding outlook, management said it expects total sales in the second quarter to be between $103 million and $105 million, with the Firearms segment expecting to contribute between $88 million and $90 million. Total gross margins are expected to be between 31% and 32% of sales.
>>> Word on the street is that firearms inventories are now starting to back up at retail and could be problematic…
