Companies & Industries

Smith & Wesson Shoppers Keep Reloading on Hand Guns


An attendee walks through the Smith and Wesson booth during the 2013 NRA Annual Meeting and Exhibits on May 3, 2013 in Houston

Photograph by Justin Sullivan/Getty Images

An attendee walks through the Smith and Wesson booth during the 2013 NRA Annual Meeting and Exhibits on May 3, 2013 in Houston

The U.S. gun market might be hotter than many thought. Despite a decline in federal background checks needed to buy firearms, Smith & Wesson (SWHC) just shot the lights out in a quarterly earnings report.

In the three months ended Jan. 31, the manufacturer, based in Springfield, Mass., said sales increased 7.1 percent, to $146 million. Profit surged 43 percent, to $20.8 million, as the company dangled fewer promotions and raised prices on some of its most popular firearms. “We continue to believe that our industry is in the midst of an underlying long-term growth trend, and our objective is to grow faster than the market,” Chief Executive James Debney said on a conference call with analysts.

The industry is certainly doing well, but growth isn’t entirely reflected in the number of people asking the FBI for approval to buy a gun.

The U.S. gun market is still robust, with consumers bearing arms at historic levels. But Wall Street doesn’t focus on historic levels as much as what happened a year ago. And in the recent quarter, background checks dropped 24 percent from the year-earlier period

The widely accepted theory is that interest from potential shooters has cooled as the likelihood of stiffer gun-control laws wanes. Sturm Ruger (RGR), a slightly larger rival, watched its stock buckle last week when it reported a drop in quarterly sales. A few days before that, Cabela’s (CAB) blamed a 10 percent slump in revenue at long-standing stores on sluggish firearm sales.

So how did Smith & Wesson buck the trend? It wasn’t with duck hunters. In the recent quarter, its sales from so-called long guns—traditional shotguns and rifles—dropped 9 percent. Handgun sales, which account for most of the company’s business, jumped 30 percent.

Some of the hottest product have been Smith & Wesson’s M&P Shield pistols, marketed as concealable, lightweight models “with proven stopping power.” They come in .40 caliber and 9mm versions and cost $450 apiece.

The company is also selling a lot of snub-nosed revolvers, which cost between $870 and $1,130. Debney theorized that the spinning cylinder models are becoming popular with customers who are looking for a second handgun.

So the types of products most targeted by the gun-control lobby are still the ones driving returns at Smith & Wesson, even as manufacturers such as Ruger, which aim more for hunters and long-gun shooters, struggle.

And as for background checks, gun shoppers need only one approval per purchase—and law-enforcement agencies, some of Smith & Wesson’s best customers, don’t have to bother with background checks at all. It’s possible that Smith & Wesson fans are simply buying in bulk.

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

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Companies Mentioned

  • SWHC
    (Smith & Wesson Holding Corp)
    • $13.66 USD
    • -0.14
    • -1.02%
  • RGR
    (Sturm Ruger & Co Inc)
    • $58.11 USD
    • -0.02
    • -0.03%
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