2015 New Business Year

Industry Closes Tough 2014, Seeks 2015 Opportunities.

Preparing for the 2015 business year presents a number of challenges for the industry. There is uncertainty about the viability of the market; concerns over excessive firearm inventory, compressed margins and ammunition shortages; and continuing anti-gun/anti-industry legislation. There’s also the lingering whiplash of 2014.
Business year 2014 was tough. Some label it as “brutal.” In reviewing the year’s business data, company financials and dealer reports, it is difficult to dispute such characterizations.

The drop in firearm sales this year was dramatic. At the close of last year, most company executives and dealers did not forecast that 2014 would match the sales numbers of 2013. Instead, 2014 was to be the year of the “new normal.”

However, few in the industry were prepared for the noted drop in firearm sales. In addition, for the first time in many years, the industry experienced a summer slump. This created a rather startling whiplash for much of the industry.

Working The Numbers

During the first 10 months of 2014, NICS conducted 10,136,171 (NSSF-adjusted) background checks, a 15 percent decline compared to 11,978,243 checks during the same months in 2013.

From a startling drop of 46 percent in background checks in January 2014 compared to January 2013, the number of check began to gradually increase through the year (Feb. -22.7%, March -18.5%, April -16.6%, May. -9.9%, June -7.6%, July -4.5%, Aug. -2.7%, Sept. -1%).

The first monthly background-check increase this year, compared to 2013, came in October. NICS conducted 1,174,797 (NSSF-adjusted) checks, during the month, a 5.5 percent increase over 2013 (1,118,994). It also was the highest October in the history of NICS.

When comparing the first 10 months of 2012 and 2014, the industry faired better, posting a 1 percent increase in 2014 for the period.

While the gradual increase in background checks forecasts increased sales, countering this are excessive inventories — acerbated by “dumping of products and a race to the bottom.” The result: drastically compressed margins.

The downturn in sales during 2014 also impacted U.S. import of firearms. During August, NSSF reports (citing U.S. International Trade Commission data) that handgun, rifle and shotgun imports decreased 56 percent. However, during August, handgun, rifle and shotgun exports increased 33 percent.

Major firearm manufactures reported major decreases in sales during 2014.

Remington Outdoor Co. reported a 56 percent decrease in firearm sales during the quarter ending June 29, compared to the same quarter in 2013. Ruger reported a 43 percent decrease in firearms sales during the quarter ending September 27. Smith & Wesson reported a 23 percent decline in firearms sales during the quarter ending July 31.
Yes, it’s been a painful “new norm.”

Despite the downturn in firearm sales, top executives are confident in the future.

“It’s just the quarter. Nothing is broken,” said Mike Fifer, Ruger CEO, referring to third quarter results during an investor’s conference call Oct. 30. “It’s encouraging also to note, that year-over-year NICS background check numbers appear to be stabilizing. That may be the earliest indication that consumers are starting to come back and could mean that the new normal levels of business may be similar to the 2012 levels.”

“Although sales for the six months ended June 29, 2014 are lower than the six months ended June 30, 2013, we believe our sales continue to remain above historical levels,” Remington officials said.

“We believe that our operational and financial strength and flexibility will benefit us in the short term, and we remain focused on our strategy to take handgun market share,” said James Debney, Smith & Wesson president and CEO.

Looking to 2015

For dealers, the new business year will have its challenges, according to Kris Jacob, president, Bullseye Shooting Range, Marin, Calif.

“In 2015, many retailers and ranges will continue to feel pressure from other segments in the retail market as well as within the firearms retail vertical. Many new competitors have entered the market and that will continue to make the environment a challenging one for the foreseeable future,” Jacob said.

Despite the challenges, dealers are looking for opportunities in 2015.

“A lot more people are being exposed to the shooting sports. There’s been a lot of publicity over the last few years, and people are figuring out shooting is fun. All of this demands retailers expand their normal, everyday gun inventory. They need to have a greater diversity of firearms in both caliber and price points,” said Bruce Kitzis, general manager of Shooters World in Tampa, Fla.

“Manufacturers are helping move product using consumer rebates and free goods, as well as dealer employee incentives — aka ‘push and pull marketing’ — which is very effective,” said Carl Ingrao, owner of Four Seasons Firearms, Woburn, Mass.

Ron Buschmann, owner of Shooter’s Supply & Law Enforcement Equipment Co., Louisville, Ky., suggests changing how the industry sets goals.

“Perhaps it’s time to stop looking to a past year for a benchmark, and think more realistically about today’s market. We need to reset the clock. That will reduce the stress of reaching for a level that doesn’t really apply in today’s real marketplace,” Buschmann said. “There’s also a lot of opportunity out there for dealers, because manufacturers have a lot of inventory. There are some phenomenal deals for stocking products, with great terms.”

Editor’s Note: Next month we’ll present our second look at the New Business Year, examining the 2015 political climate and challenges, plus a review of the market and its opportunities.
By Russ Thurman

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