New Business Year

Industry Conquers 2015, Prepares For 2016 Challenges

Laying the groundwork for the 2016 New Business Year presents a host of challenges for the industry. Not that the industry hasn’t faced and overcome numerous trials. Most recently, the industry has battled through the “new normal,” white-hot to chilly sales, excessive inventory, ammunition shortages, “race-to-the-bottom” pricing and dumping (with inherent compressed margins) and encouraging/not-so-encouraging rollercoaster sales.

Next up: Aggressive campaigns for gun control. Yes, 2016 will have its own, unique set of challenges, many of them driven by those seeking to become the next president.

Also setting the tone for 2016 business is the good and not so good of 2015.

Consumers Began Buying

The 2015 New Business Year began in promising fashion. The start was refreshing, given a brutal 2014. During the first nine months of 2014, the industry experienced significant decreases in sales. Gradually, beginning in October 2014, sales increased and in December 2014 NICS conducted the highest number of background checks for a single month since January 2013.

While many attribute the uptick in sales during the latter part of 2014 to drastic discounts to clear an overburdened distribution pipeline (with little profit), it nevertheless created optimism for 2015. It was short-lived.

By March 2015, sales softened and nearly stalled. Manufacturers quietly laid off hundreds of employees, reduced production and curtailed expansion plans. Dealers reported a scarcity of customers. It wasn’t pretty.

Then on the way to an all-out industry crash, consumers began buying again. In June, NICS conducted the highest number of background checks for that month in the history of the system. The 886,825 (NSSF-adjusted) background checks were a 10 percent increase over 2014, and even bested the 2013 “Golden Year” by 1.7 percent. It surprised many.

“We had a roughly 10 percent increase in June; it was kind of shocking to see,” said Justin Hardy, manager of Rock House Pawn in Meridian, Miss.

The increases continued. In July, NICS conducted 946,528 (NSSF-adjusted) background checks, another historic-high for a month, and a 15.9 percent increase (NSSF-adjusted) over July 2014.

“It was interesting to see the acceleration of NICS checks in July over June. That is unusual when you look at history. [That] doesn’t normally happen till August,” said James Debney, Smith & Wesson Holding Corp. president, CEO.

In August, September and October, the number of background checks increased 4.3 percent (1,031,959), 4.7 percent (1,071,945) and 3.1 percent (1,211,478), respectively.

The return to increased sales was a major morale booster for manufacturers, distributors, importers and dealers as they began the 2015 peak-buying season.

Return To Increased Sales

Ruger punctuated its confidence in the future with the announcement of its 2 Million Gun Challenge.

“We’re bringing back the 1 Million Gun Challenge with a twist,” said Mike Fifer, Ruger CEO. “Our goal is to sell two million firearms between the 2015 and 2016 NRA Annual Meetings.”

Ruger will donate $2 to the NRA for every new firearm sold between the two meetings.

“We accomplished our goals to support the NRA in 2012, and with the help of our loyal customers, we believe we can do it again,” Fifer said.

Driving that confidence was a return to increased sales. Ruger reported overall sales of $140.9 million for its second quarter, which ended June 27. While this is an 8.3 percent decrease compared to the same quarter in 2014, it was a 15 percent increase over the fourth quarter, which ended Dec. 31, 2014 — a notable improvement in six months.

In November, Ruger reported continued increases in sales.

“In the third quarter of 2015, net sales increased 23 percent and earnings increased 76 percent from the third quarter of 2014,” Fifer said.

Third quarter sales were $120.9 million compared to $98.7 million for the same 2014 quarter. The company’s estimated sell-through of products from distributors to retailers increased 28 percent during the quarter.

Smith & Wesson, after reporting decreased sales early in 2015, regained solid footing by midyear. Early in 2015, the company reported its overall sales for its third quarter, which ended January 31, were down 10.5 percent, compared to the 2014 third quarter. In August, S&W reported its sales for the first quarter 2016, which ended July 31, had increased 12.1 percent, compared to the same quarter in 2014.

This translates to a six-month, 13 percent increase in overall sales from the end of January until the end of July, with an 8 percent increase in firearms sales.

In addition to an increase in firearms sold, which include the Thompson/Center line, S&W officials cite “excellent results” in the company’s accessory division. The division posted $13.3 million in sales during the first quarter 2016.

“Based upon our performance for the first quarter and our current outlook for the remainder of fiscal 2016, we are raising our full-year revenue and net income guidance,” Debney said.

During an Aug. 27 earnings conference call, Debney said the company’s most important focus was on product development.

“We currently have more than 120 new products and line extensions in development; many of which will be unveiled at SHOT Show this coming January,” he said.

Remington, after numerous negative quarters, reported $88.2 million in firearm sales during its 2015 second quarter, which ended June 28. The 8.4 percent increase, compared to the second quarter 2014, was built on increases in MSR and centerfire rifles. The company reported decreased sales in shotguns, handguns and rimfire rifles.

In ammunition, Remington reported second quarter sales of $93.5 million, a decrease of 10.9 percent, compared to the corresponding months in 2014. Rimfire ammunition posted an increase of $4.7 million.

Vista Outdoor reported its sales for its first full quarter of fiscal year 2016, which ended July 5, were down 9 percent, compared to the same quarter last year.

“While the revenue for the recent quarter is as expected, lower than the same period a year ago due to the shooting sports market correction, we delivered strong, sequential quarter-over-quarter growth. In addition, we see several indicators that support our expectations for low, single-digit organic growth for the full fiscal year,” said Mark DeYoung, Vista Outdoor chairman and CEO.
During the quarter, Vista Outdoor acquired CamelBak, known for its personal hydration systems, and Jimmy Styks, a major player in the paddleboard market.

Olin Corp. reports Winchester Ammun-ition sales for the second quarter 2015 were $194.2 million, a 7.29 percent increase over the second quarter 2014.

“In the Winchester business, third quarter 2015 earnings are expected to be comparable to third quarter 2014 levels ($209.6 million),” said Joseph D. Rupp, Olin chairman and CEO.

Beyond The Ledger

Experts attribute the improvement in this year’s consumer spending to numerous factors: throughout-the-year new product introductions, significant increases in consumer promotions/rebates and enhanced dealer programs (with major deals and discounts). These are key elements, of course.

But perhaps the major element driving sales is the increasing unrest in the country and the corresponding concern for personal safety.

City riots, anti-police rhetoric and shootings, tragic church and school shootings, killing of U.S. military personnel on our own soil, live TV execution-style shootings — the killing and maiming has stunned all of us.

And consumers are responding, accordingly. And, that will continue to motivate sales into 2016.

“Most of our firearm sales have been in handguns for the CHL (Concealed Handgun License) course. Customers are concerned about safety. People don’t know what to expect today,” said Mary Wiley owner of Wiley Guns in Willis Point, Texas.

The anti-gun movement has regained significant footing this year; it’s been energized. Yes, such anti-gun campaigns and rhetoric drives sales. That’s the positive. The negative is the increased anti-gun/anti-industry legislation. And the time and energy required to fight the battles.

How the industry handles all this will determine just how successful it can rate 2016 — beyond the ledger.
By Russ Thurman

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