Smith & Wesson: Americans are buying fewer guns

National/World News
he leading Senate negotiations on gun control legislation favor expanding background checks, but the effort would fall short of the universal approach backed by President Barack Obama and many Democrats. (Credit: CNN)

(Credit: CNN)

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NEW YORK — Smith & Wesson posted disappointing earnings and a weak forecast for one simple reason: Americans are buying fewer guns.

Shares of the gun-maker plunged 12 percent in premarket trading Friday as it dawned on investors that the once high-flying gun industry is coming down to earth.

The gun industry has experienced an intense run-up in demand over the last couple years, fueled by concerns of more rigorous gun restrictions in the wake of President Barack Obama’s re-election and a series of mass shootings including the Sandy Hook massacre in Newtown, Conn.Gun enthusiasts stockpiled the military-style semiautomatic rifles that are often referred to as assault rifles, exhausting the supply and driving up the prices. But Obama failed to get a bill through Congress that would have placed restrictions on these guns, alleviating concerns that they would be hard to come by.

But there are still signs of growth. Smith & Wesson recently reported a hefty increase in handgun sales, buoyed by growing consumer interest in self-defense and concealed carry.

“Compact guns and polymer guns are selling really well,” said Brian Ruttenbur, gun analyst for CRT Capital. “They are ramping up production dramatically.”

Ruttenbur said that Smith & Wesson’s latest line of M&P compact pistols is so popular that supply is running thin.

“You can’t find an M&P gun on the shelf,” he said. “This is their competitor to Glock.”

For the fourth quarter, Smith & Wesson reported a decline in net sales of more than 4 percent to $170 million and a 13 percent drop in income from continuing operations to about $25 million.

Company executives preferred to emphasize record sales of $626 million for the fiscal year, up 6 percent from the prior year”We are very pleased with our record results for fiscal year 2014, which include the highest sales, gross margin and profits in the company’s history,” said Smith & Wesson Chief Executive Officer James Debney, in a press release. “Our successful performance was driven by robust consumer demand for our products, combined with carefully managed increases in our manufacturing capacity.”

Smith & Wesson projects that net sales for fiscal year 2015 will dip to a range of $585 million to $600 million.

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