America’s largest gun maker saw a 69 percent decline in sales year over year.
That’s according to Smith & Wesson’s financial statements for its last quarter ending in July, which were published on Thursday. Sales fell from $274.6 million in the first quarter of 2021 to $84.4 million in 2022, a drop of over $190.2 million. Profits came down from $129 million to $31 million over the same period.
Mark Smith, President and CEO of Smith & Wesson, told investors the contraction was “fully within our expectations” as demand returns to normal levels after several years of elevated sales.
“As expected, our first quarter results reflected a return to a normal demand pattern at the retail counter for firearms combined with temporary headwinds from inventory corrections within the channel,” he said during a Thursday call with investors. “The industry experienced our first normal summer slowdown in three years. In addition to the usual seasonal foot traffic decline throughout the period, our channel partners were also selling through existing inventory.”
Smith & Wesson’s numbers, alongside similar declines reported by Ruger last month, show even the most popular gun brands have begun to experience the pullback in the market. While established brands continued to see elevated sales and record profits even as FBI background checks began to decline last year, that decline has apparently caught up with them. The contraction indicates the record gun-sales surge that started in 2020 is well and truly over.
Smith & Wesson indicated the company is still flush from years of record sales, though.
“We were pleased with our gross margin, which was equal to our gross margin in the first quarter of fiscal 2020 in spite of lower sales and 1.5% better when adjusted for the relocation,” Deana McPherson, the company’s CFO, said in a statement. “Our balance sheet remains strong with $110.5 million of cash and no debt, and we expect to continue generating strong cash flow for the foreseeable future.”
With sales stabilizing above pre-pandemic highs and Democrats aggressively pursuing new gun bans at the federal level, it’s unlikely demand for guns will completely dissipate anytime soon. An analysis by the National Shooting Sports Foundation, the industry’s trade group, found August saw a slight drop in gun sales but still represented the 37th month in a row with more than a million gun sales. Another recent report from the group said the gun industry has more than tripled since 2008.
The numbers from Smith & Wesson reflect that growth, especially in profitability.
“Despite a challenging quarter from a top-line perspective, the team delivered impressive profitability, which far exceeded the pre-pandemic comparable quarter in fiscal 2020 – not just in relative percentages but in absolute dollars,” Smith said.
He said there was reason to believe the company was in for a quick rebound as well.
“With a pickup in order rates over the past few weeks and a significant drop in unit inventory levels within the channel, we believe the inventory correction should now largely be in the rearview mirror,” Smith said. “We continue to expect strong profitability over the remainder of the year aided by our disciplined approach to cost control and promotional spending.”
The company said it would continue to pay out dividends.
“Consistent with our capital allocation strategy, our board of directors has authorized a $0.10 per share quarterly dividend, which will be paid to stockholders of record on September 22, 2022 with payment to be made on October 6, 2022,” McPherson said.
The company reported selling nearly 60,000 handguns and over 14,000 long guns. That was out of the 128,000 handguns and 28,000 long guns they shipped.