Sales

Gun Shoppers Finally Holster Their Wallets


Americans’ fondness for snapping up firearms—and the fear they will become tougher to buy—appears to finally be waning a bit.

During recent months, the number of background checks conducted by the FBI (PDF) marked the first year-over-year drop in almost two years. In August, for instance, the FBI processed 1.4 million inquiries into potential gun buyers, down 7 percent from August 2012. Here’s a look at demand for background checks over time:

The decline comes as gun-rights advocates appear to have relaxed a bit. Despite a string of high-profile public shootings and a second election victory for a president who shoots skeet awkwardly, at best, those seeking tougher gun-control measures remain a long way from their targets. To put it in terms favored by the National Rifle Association, nobody is having much success prying anything from anyone’s hands—cold, dead, or otherwise.

This is somewhat bittersweet for gun makers and retailers, who have up to now been selling firearms as fast as they can make and ship them. To judge by sales data out of Smith & Wesson (SWHC) and Sturm Ruger (RGR), handguns have been hotter than iPhones (AAPL) or virtually any other palm-sized product.

The high point came in January, weeks after the grisly elementary school shooting in Newtown, Conn. Background checks surged 81 percent that month; not surprisingly, Smith & Wesson and Ruger experienced sales gains of around 39 percent.

For now, even with fewer background checks, business for manufacturers remains brisk. This morning Ruger posted a 45 percent increase in quarterly sales and said demand remains high. In early September, Smith & Wesson similarly shot the lights out on Wall Street by announcing a 30 percent increase in guns sold. “We continue to see strong pull for a majority of our product portfolio,” Chief Financial Officer Jeffrey Buchanan said on a conference call at that time.

Last month, however, major gun retailer Cabela’s (CAB) warned that firearms demand had been dropping “significantly” while ammunition sales slowed as well. The company’s same-store gun sales fell 2.5 percent in the recent quarter, which the chain will no doubt take into account the next time it puts in wholesale orders at Sturm Ruger and Smith & Wesson. “We’re actually anticipating it to get worse,” Cabela’s CFO Ralph Castner said during a conference call.

Those listening closely will notice the script changing a bit at U.S. gunmakers. Firearm executives are talking less about surging demand and first-time buyers and more about stealing market share from each other. They are spending more time touting their newest firearms, rather than talking about their long and storied history.

Ruger Chief Executive Officer Michael Fifer got downright testy on Wednesday morning, when analysts asked about the recent decline in retail demand and whether business disappeared in October. “It’s crazy enough … to have you guys demanding earnings every quarter, much less wanting to know what they were every month or every week,” he said. “So let’s not waste time going there.”

The Wild West atmosphere is dissipating and the territory is getting tight—and that means Ruger and Smith & Wesson might be aiming at each other for the first time in years as the manufacturers compete for scarcer sales.

Kyle-stock-190
Stock is an associate editor for Businessweek.com. Twitter: @kylestock

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Companies Mentioned

  • SWHC
    (Smith & Wesson Holding Corp)
    • $13.42 USD
    • -0.30
    • -2.24%
  • RGR
    (Sturm Ruger & Co Inc)
    • $58.06 USD
    • -0.40
    • -0.69%
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