Sturm, Ruger & Co. reported earnings slid 36.3 percent in the first quarter, to $15.5 million, or 81 cents a share. But earnings came in better than Wall Street's consensus estimate of 65 cents and management indicated underlying demand for firearms continues to improve.
Revenues in the quarter slumped 19.4 percent to $137.0 million. Firearms sales were down 19.9 percent to $135.6 million while casting sales jumped 90.4 percent to $1.4 million.
The overall decline was attributed to the reduction in overall consumer demand, higher inventory levels at the retailers and the distributors, and relatively fewer new product introductions by the company during the past year.
Gross margins eroded to 30.2 percent from 36.0 percent in the reduced sales volume and a product mix shift away from higher-margin firearms accessories. SG&A expenses decreased 24.0 percent due to a 25 percent reduction in performance-based incentive compensation and profit-sharing expenses.
Michael Fifer, CEO, however, said demand for the company’s firearms in the quarter increased from the fourth quarter due to the successful annual sales promotions in effect during the latest quarter, coupled with a reduction in the aggressive price discounting by many competitors that was prevalent in the latter half of 2014.
In the first quarter, sales and the estimated sell-through of the company’s products from the independent distributors to retailers increased 12 percent and 15 percent, respectively, from the fourth quarter. The National Instant Criminal Background Check System background checks (as adjusted by the National Shooting Sports Foundation) decreased 15 percent during the same period.
Inventory of the company’s products at the independent distributors decreased 64,700 units during the first quarter and the company’s finished goods inventory decreased by 53,100 units during the same period.
Earnings in the first quarter increased 53 percent from the fourth quarter of 2014, excluding the expense related to the termination and settlement of the defined benefit pension plans in 2014.
Net orders received in the first quarter of 2015 decreased 11 percent from the comparable prior year period, but increased 55 percent from the fourth quarter of 2014.
