Industry Seeks New Normal As Sales Soften

By Russ Thurman

The downturn in sales is impacting companies throughout the industry, from manufacturers through dealers. Following the national elections, consumer sales softened, most notably beginning in December. The election of President Trump removed the threat of national gun control, which eliminated the “must buy now” fear factor that motivated a lot of sales the past eight years.

NICS conducted 1,845,847 (NSSF-adjusted) background checks last December, the highest month for the year, but a 17 percent drop from December 2015.
In January, NICS conducted 1,038,365 (NSSF-adjusted) background checks, a 23.8 percent decrease compared to January 2016.

In February, the number of background checks was also below the previous year, dropping 12.7 percent from 1,487,274 (NSSF-adjusted) in February 2016 to 1,298,208 in February of this year.

Firearm Sales Cool

On March 2, American Outdoor Brands Corp. (AOBC) reported its third quarter 2017 sales, which ended January 31, were $233.5 million, a 10.8 percent increase over the same quarter last year.

“Toward the end of the quarter, consumer firearm purchasing began to cool — a trend that underscores the importance of remaining focused on our strategy to continue growing and balancing our business across the shooting, hunting and rugged outdoor enthusiast markets,” said James Debney, AOBC president and CEO.

Despite the decline, Debney expressed optimism in the market’s future.

“The main motivators [for firearm purchases] remain personal protection; that’s good and it’s great to see that exciting change in the demographic of firearm consumers, as well. So, all in all, yes, there are definitely some headwinds out there in the channel, as I’d mentioned. But, we remain positive about the future,” Debney said during a March 3 investors conference call.

Feb. 22, Ruger announced its full 2016 sales were $664.2 million, a 21 percent increase over 2015. For Ruger’s fourth quarter of 2016, ending December 31, sales were $161.8 million, a 6 percent increase over the same quarter in 2015.

“As we discussed in our last call Nov. 2, just prior to the election, we observed many customers spending discretionary income on concealed carry products and MSRs in the weeks and months leading up to the election,” said Chris Killoy, Ruger president and COO, during a Feb. 23 investors conference call.

“At the same time, we also observed retailers committing inventory dollars to certain product categories, such as modern sporting rifles, which likely would’ve been in stronger demand if the election had turned out differently, given their relative vulnerability to legislative actions. The combination of increased inventory in the channel and a likely decrease in consumer demand for the near term has made for a more challenging sell-through environment.”

During the investor’s conference call, Mike Fifer, Ruger CEO, countered a suggestion sales may return to levels experienced before President Obama.

“Firearms ownership is much more socially acceptable; it’s much wider than it was before. There are more states that have adopted laws enabling concealed carry. There’s just a whole raft of reasons including many, many new shooters have come on in the last eight years that are now buying their second or third or tenth gun. And I think the market really is substantially different than it was pre-Obama,” Fifer said.

Larger Consumer Base

Feb. 9, Vista Outdoor reported its fiscal year 2017 third quarter sales were $654 million, a 10 percent increase over the same quarter in 2016. Third quarter sales included $92 million from Vista’s recent acquisitions. Vista reports sales were down five percent on an organic basis. In its Shooting Sports segment, Vista reports third quarter sales of $361million, a 1 percent increase from the same quarter in 2016.

“The challenging retail environment we experienced in our first and second quarters worsened in our third quarter following a slow hunting season and the national elections. This resulted in the need for increased promotional activity to support sales and maintain market share. We have also seen increased inventory in our retail and wholesale channels,” said Mark DeYoung, Vista Outdoor chairman, CEO.

During a February 9 conference call, DeYoung said while there are challenges, there are favorable indicators.

“There are a lot of new people that have come into the shooting sports and purchased firearms for the first time or the second or the third or the fourth. And so we know there is a larger installed base of people that consume our products, which I think bodes well in the long term,” DeYoung said.

Jan. 31, Olin Corp. reported its 2016 fourth quarter results, ending Dec. 31, 2016. Winchester Ammunition sales for the quarter were $161.4 million compared to $203.2 million in the third quarter.

“We are cautious about the Winchester business, which may experience a year-over-year decline in segment earnings as a result of lower ammunition demand, driven by customer efforts to reduce inventory and higher commodity and material costs,” said John E. Fischer, Olin Corp. president, CEO.

Real Benchmarks?

This is not the first downturn the industry has experienced, although it may be the sharpest in recent history. Once again, the industry is in search of the new normal — the real benchmark for sales in today’s consumer market and political environment.

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