Sturm, Ruger’s Q2 Revenues Drop 25 Percent

Sturm, Ruger & Company Inc. reported sales in the second quarter slumped 25 percent to $96.3 million from $128.4 million.  Earnings fell 58.9 percent to $6.2 million, or 35 cents a share, from $15.2 million, or 86 cents, a year ago.

For the six months ended June 29, 2019, net sales were $210.4 million and diluted earnings were $1.09 per share. For the corresponding period in 2018, net sales were $259.6 million and diluted earnings were $1.68 per share.

The company also announced today that its Board of Directors declared a dividend of 14¢ per share for the second quarter for stockholders of record as of August 15, 2019, payable on August 30, 2019. This dividend varies every quarter because the company pays a percentage of earnings rather than a fixed amount per share. This dividend is approximately 40 percent of net income.

Chief Executive Officer Christopher J. Killoy commented on the second quarter results, “Thus far, 2019 has been challenging for the firearms industry. Our internal surveys of distributors and retailers indicate that the overall market for new firearms in the first half of the year may have declined more than the adjusted NICS data would indicate. Despite the softness in demand, we will not go down the path of quick fixes, deep discounting and reckless extension of payment terms in an effort to generate better short term results – at the expense of the long term, disciplined execution of our strategy. Our strategy remains focused and consistent. We will continue to develop innovative and exciting new products, optimize our cost efficiency through our commitment to lean business practices, and employ a disciplined approach to capital allocation.”

Killoy concluded, “We have $132 million of cash and short-term investments and no debt, which puts us in a unique position in our industry. We remain financially strong, fiscally disciplined, and focused on delivering long-term value to our shareholders.”

Killoy made the following additional observations related to the company’s 2019 second quarter performance:

• The estimated unit sell-through of the company’s products from the independent distributors
  to retailers decreased 26 percent in the first half of 2019 compared to the prior year period. For the
  same period, the National Instant Criminal Background Check System (“NICS”) background
  checks (as adjusted by the National Shooting Sports Foundation) decreased 5 percent. The greater
  reduction in the sell-through of the company’s products relative to adjusted NICS
  background checks may be attributable to the following:
   The aforementioned discounting and extension of payment terms offered by our
  competitors,
   Relatively fewer new product shipments compared to the first half of 2018, which
  benefitted from the launch of four major products in December of 2017,
   The loss of a formerly significant distributor that ultimately filed for bankruptcy
  protection in June 2019,
   Increased sales of used firearms at retail, which are included in adjusted NICS
  checks, and
   Decreased retailer inventories as the anticipation of further discounting led to
  cautious buying behavior by retailers.
• Sales of new products, including the Wrangler, which was introduced in April 2019, the Pistol
  Caliber Carbine, the EC9s pistol, the Security-9 pistol, and the Precision Rimfire Rifle,
  represented $22 million or 25 percent of firearm sales in the second quarter of 2019. New product
  sales include only major new products that were introduced in the past two years.
• During the second quarter of 2019, total company and distributor inventories decreased by
  18,400 units.
• Cash used by operations during the first half of 2019 was $6.4 million. At June 29, 2019, our
  cash and short-term investments totaled $132 million. Our current ratio is 5.1 to 1 and we
  have no debt.
• In the first half of 2019, capital expenditures totaled $3.9 million. We expect our 2019 capital
  expenditures to total approximately $15 million, most of which relate to new product
  introductions.
• In the first half of 2019, the company returned $10.0 million to its stockholders through the
  payment of dividends.
• At June 29, 2019, stockholders’ equity was $275.8 million, which equates to a book value of
  $15.76 per share, of which $7.53 per share is cash and short-term investments.