Sturm, Ruger & Company Inc. reported earnings slumped 33.3 percent in the fourth quarter as revenues declined 13.2 percent.
For the fourth quarter of 2019, net sales were $105.1 million and diluted earnings were 46 cents per share. For the corresponding period in 2018, net sales were $121.1 million and diluted earnings were 69 cents per share.
For the year, earnings were down 36.6 percent to $32.3 million, or $1.82 a share, from $50.9 million, or $2.88, a year ago. Revenues reached $410.5 million against $495.6 million in 2018, representing a decline of 17.2 percent.
The company also announced today that its Board of Directors declared a dividend of 18 cents per share for the fourth quarter, for shareholders of record as of March 13, 2020, payable on March 27, 2020. 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 year, “2019 was challenging for the firearms industry as manufacturing overcapacity, excess inventories at all levels of the channel and a continued softness of demand led to a marketplace saddled with undisciplined discounting, reckless extension of payment terms and excessive promotions. This left some distributors and manufacturers in its wake. Conversely, our promotional efforts in 2019 were more measured and instead we focused on delivering shareholder value over the long term, including our steadfast commitment to new product development.”
Killoy continued, “As a consequence, we are well-positioned as we head into 2020. The Ruger-57 pistol, which was launched in December, has received an overwhelming reception. We also just launched the latest LCP pistol, the LCP II in .22 LR, which is enjoying strong demand, and we look forward to introducing additional new and innovative firearms in 2020. Our financial strength, evidenced by our $165 million of cash and short-term investments, places us in a unique position in our industry from which we can either profitably weather a storm or thrive in a recovering market, always keeping an eye out for any long-term opportunities that may emerge.”
Killoy made the following additional observations related to the company’s 2019 performance:
- In 2019, sales decreased 17 percent from 2018 and the estimated sell-through of the company’s products from the independent distributors to retailers decreased 18 percent from 2018;
- For the same period, the National Instant Criminal Background Check System (NICS) (background checks as adjusted by the National Shooting Sports Foundation) increased 1 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:
- More aggressive promotions, discounts, rebates and the extension of payment terms offered by its competitors;
- The loss of formerly significant distributors that ultimately filed for bankruptcy protection in June 2019 and the market disruption caused by the subsequent liquidation of its inventory of Ruger products;
- The loss of three additional smaller distributors in the second half of 2019;
- An apparent increase in sales of used firearms at retail, which are captured by adjusted NICS checks, and
decreased retailer inventories as the anticipation of further discounting continued to encourage cautious buying behavior by retailers.
- New products represented $102.0 million, or 26 percent of firearms sales in 2019. New product sales include only major new products that were introduced in the past two years. In 2019, new products included the Ruger-57, the LCP II in .22 LR, the Wrangler, the Pistol Caliber Carbine, the Precision Rimfire Rifle, the AR pistol, the Security-9 pistol, and the EC9s pistol.
- In 2019, the company’s finished goods inventory decreased 12,900 units and distributor inventories of the company’s products decreased 29,300. In the aggregate, total company and distributor inventories decreased by 11 percent in 2019.
- Cash generated from operations during 2019 was $49.6 million. As of December 31, 2019, its cash and short-term investments totaled $165 million. Its current ratio is 4.1 to 1 and the company has no debt.
- In 2019, capital expenditures totaled $20.3 million. Sturm, Ruger said it expects its 2020 capital expenditures to total approximately $20 million.
- In 2019, the company returned $16.3 million to its shareholders through the payment of $14.3 million of dividends and the repurchase of 44,500 shares of its common stock in the open market at an average price of $44.83 per share for a total of $2 million.
- As 0f December 31, 2019, stockholders’ equity was $285.5 million, which equates to a book value of $16.05 per share, of which $9.28 per share was cash and short-term investments.
Photo courtesy Sturm, Ruger & Company Inc. / Shown Ruger 57 Centerfire Pistol