Sturm Ruger & Company (NYSE:RGR) delivered another robust quarter as overall firearms sales continue to benefit from concerns over potential gun-control legislation. But shares still fell after the company surprised Wall Street with a CEO succession plan.

Michael Fifer, who has headed the company for a decade, will retire in May 2017 and will be replaced by COO Christopher Killoy. In the decade that Fifer has led the company, sales increased almost four-fold. Its market value jumped seven-fold to $1.3 billion, according to data compiled by Bloomberg.

Killoy worked at General Electric Co. and Smith & Wesson before joining Ruger as Executive Director of Sales in 2003. He became President and COO in 2014 and will be the fourth CEO in Ruger’s 67-year history.

“I have worked closely with Chris for 10 years, and he is well qualified to become Ruger’s fourth CEO,” Fifer said on a conference call with analysts. “He has been very successful in his 27 years in the firearms industry and has justifiably earned a great reputation. Our employees, customers and shareholders will be in good hands.”

Shares of Ruger slid 4.5 percent to $66.18 on August 3.

In the second quarter, net sales climbed 19.2 percent, to $167.9 million. Earnings rose 33.9 percent to $23.5 million, or $1.22 a share.

On the same call, Killoy noted that the estimated sell-through of the company’s products from the independent wholesale distributors to retailers, which Ruger believes is the best available measure of demand, increased 20 percent in the second quarter and 18 percent in the first half from the comparable prior-year periods.

“We believe the increase in estimated sell-through of the company’s products from the independent wholesale distributors to retailers is attributable to, one, the increase in overall industry demand, fueled in part by the current political climate, two, strong demand for certain new Ruger products and three, increased production of several products in strong demand,” Killoy said.

Killoy further noted that the increased sell-through of its products in 2016 compares favorably to corresponding increases in the adjusted NICS checks of 15 percent in the second quarter of 2016, and 16 percent in the first half of 2016.

Amid a series of shootings, the FBI reported that last month was the busiest July on record for background checks, putting 2016 on pace to set an annual record.

The gains were helped by a strong response to new products, which represented $53 million, or 33 percent, of firearm sales in the latest second quarter. New product sales, including the American pistol, the precision rifle, the AR-556 modern sporting rifle and the LC9s pistol, reflect only major new products that were introduced in the past two years.

“New product development remains a top priority,” Killoy said.

Regarding its inventory positioning, finished goods inventories during the quarter increased 26,000 units, and the inventory of Ruger firearms at the independent wholesale distributors increased 50,000 units. The inventory growth was principally in seasonal products that will be in greater demand during the latter half of the year and is typical of inventory strategy at this time of the year.

“During the third quarter, we also hope to build inventory of products that we believe will be in strong demand after the November elections,” Killoy said. “We are working hard to increase manufacturing capacity for these products, but successfully building that inventory may be challenging as current demand apparently continues to exceed our capacity, even as we work to increase it.”

Ruger is also taking a number of steps that may boost sales in the second half. Last Tuesday, it announced the Ruger Take Action campaign, which includes a $5 million “challenge grant” to benefit the NRA’s Institute for Legislative Action (NRA-ILA).

“We hope this call to action inspires our customers and all freedom-loving Americans to take action in support of the Second Amendment, especially in the months leading up to the November election,” said Fifer.

The campaign will also encourage customers to contact their senators, representatives and other influential politicians to support the NRA by purchasing a Ruger firearm. Ruger will donate $2 to the NRA-ILA for every gun sold through the November elections. Ruger will match contributions to the NRA-ILA dollar for dollar, up to $5 million in the aggregate, between now and the November elections. Ruger is also encouraging “customers and all Americans to have their voice heard and to vote in the November elections.”

“I have no doubt about it, the makeup of the Supreme Court is on the ballot this November, and therefore, the Second Amendment is also firmly on the ballot,” added Fifer. “We think the NRA, through its Institute for Legislative Action, is best positioned to support the key races in the upcoming elections that will affect our firearm rights for decades to come.”

Photo courtesy Sturm Ruger & Company