Smith & Wesson Brands, Inc. reported a significant decline in earnings in the fiscal first quarter that ended July 31 as sales dropped 69 percent.

First Quarter Fiscal 2023 Financial Highlights

  • Net sales were $84.4 million, a decrease of $190.2 million, or 69.3 percent, from the comparable quarter last year, and $11.0 million, or 11.6 percent, lower than the comparable quarter in fiscal 2020.
  • Gross margin was 37.3 percent compared with 47.3 percent in the comparable quarter last year and 37.3 percent in the comparable quarter in fiscal 2020. Excluding relocation costs, gross margin would have been 38.8 percent.
    GAAP net income was $3.3 million, or $0.07 per diluted share, compared with $76.9 million, or $1.57 per diluted share, for the comparable quarter last year, and with $2.2 million, or $0.04 per diluted share, for the comparable quarter in fiscal 2020.
  • Non-GAAP net income was $5.1 million, or $0.11 per diluted share, compared with $77.1 million, or $1.57 per diluted share, for the comparable quarter last year, and with $2.2 million, or $0.04 per diluted share, for the comparable quarter in fiscal 2020. GAAP to non-GAAP adjustments for income exclude costs related to the planned relocation of our headquarters and certain manufacturing and distribution operations to Tennessee, the spin-off of the outdoor products and accessories business in fiscal 2021, COVID-19-related expenses, and other costs.
  • Non-GAAP Adjusted EBITDAS was $15.7 million, or 18.5 percent of net sales, compared with $109.6 million, or 39.9 percent of net sales, for the comparable quarter last year, and with $17.3 million, or 18.2 percent of net sales, for the comparable quarter in fiscal 2020.

Mark Smith, president and chief executive officer, commented, “As expected, our first quarter results reflected a return to a normal demand pattern at the retail counter for firearms combined with temporary headwinds from inventory corrections within the channel. Despite a challenging quarter from a top-line perspective, the team delivered impressive profitability, which far exceeded the pre-pandemic comparable quarter in fiscal 2020 not just in relative percentages but in absolute dollars. With a pickup in order rates over the past few weeks and a significant drop in unit inventory levels within the channel, we believe the inventory correction should now largely be in the rearview mirror. We continue to expect strong profitability over the remainder of the year aided by our disciplined approach to cost control and promotional spending.”

Deana McPherson, executive vice president and chief financial officer, commented, “Our financial performance continues to reflect tough year-over-year comparisons due to the return to more normalized levels of demand following the surge. We were pleased with our gross margin, which was equal to our gross margin in the first quarter of fiscal 2020 in spite of lower sales and 1.5 percent better when adjusted for the relocation. Our balance sheet remains strong with $110.5 million of cash and no debt, and we expect to continue generating strong cash flow for the foreseeable future. Consistent with our capital allocation strategy, our board of directors has authorized a $0.10 per share quarterly dividend, which will be paid to stockholders of record on September 22, 2022 with payment to be made on October 6, 2022.”

Photo courtesy Smith & Wesson