The huffingtonpost.com’s take on guns is like Candide in reverse. When it comes to firearms, the anti-gun site’s writers live in the worst of all possible worlds. Every story on guns indicates a “gun violence” epidemic. Every study proves that owning guns is like juggling vials of anthrax. So when I read John A. Tures’ article Why Gun Manufacturers Are in Serious Financial Trouble “celebrating” AR-15 maker Colt’s descent into bankruptcy, I looked for the usual malicious prevarication . . .
. . . it’s not just Colt that’s going down the drain. Sturm, Ruger’s sales are dropping dramatically. So are Smith & Wesson’s (number two in the industry), both which are leading to dropping stock prices. It’s a similar story for gun stores, as one Georgia business reported difficulties even giving an AR away.
Following the Ruger link to money.cnn.com, we learn that . . .
Sturm, Ruger (RGR) of Southport, Conn., one of the most prominent gunmakers, reported a plunge in sales and profit this week that sent its stock into a tail spin on Thursday. Net sales over three months went to $98 million from $171 million a year ago.
Following the Smith & Wesson link (from last August) to its bloomberg.com source we learn that . . .
Smith & Wesson’s sales fell 23 percent to $131.9 million in the quarter ended July 31, the company said, missing the $134 million average analyst projection. The company, the second-largest publicly traded firearms maker, said slumping sales of long guns, including modern sporting rifles, drove 87 percent of the revenue decline. Net income dropped 45 percent to $14.6 million, or 26 cents a share, beating the 25-cent average analyst estimate.
Sales will be $530 million to $540 million in the fiscal year ending in April, the company said, backing off a previous forecast of $585 million to $600 million. Annual earnings will be 89 cents to 94 cents a share, instead of the $1.30 to $1.40 seen earlier.
There are plenty of theories in these articles about the reason for the drop, ranging from the HuffPo’s long-held contention that the post-Newtown boom was due to existing gun owners stocking-up against fears of confiscation, to more pragmatic analysis. Specifically, that Ruger and Smith over-extended themselves to satiate a huge spike in demand, over-producing ballistic hay while the gun rights sun went into hiding.
Let’s go with that. Here’s money.cnn.com‘s take on Ruger’s woes from back in October:
Sturm, Ruger makes a wide variety of guns, including M4 and Mini-14 military-style rifles, and sells them to distributors, who sell them to stores. It said “retailers [were] buying fewer firearms than they were selling, in an effort to reduce their inventories and generate cash.”
This is quite different from 2013 and earlier this year, when Sturm, Ruger CEO Michael Fifer complained about retailers placing “grossly unrealistic” orders with his company.
Here’s bloomberg.com’s more recent take on Smith’s troubles:
As enthusiasm for stricter gun control has subsided, prices for the long guns have slumped and desperate wholesalers have offered incentives like “buy four, get one free,” said Hornsby, 64. During the rush, he had to pay wholesalers incentives to get access to inventory.
“There’s not an immediate fear the government’s going to take them away so sales are back to a more traditional pace,” said Hornsby, whose store displays about 850 gun models. Assault rifles more expensive than $700 are the hardest to sell now, he said.
Again, it sounds to me like a simple supply and demand problem, where supply overtook demand and manufacturers stuffed the sales channel as fast they could (with plenty of encouragement from distributors and dealers). In plain language, a gun bubble burst. Bloomberg (of all people) nails it.
“Gun ownership has become normalized among a greater demographic,” said [Minneapolis-based analyst for Dougherty & Co. Andrea] James, adding that the long-term trend is still favorable for gun makers. “Are people buying as many guns this year as they were last year? No. Are people buying more guns than they were three years ago? Yes. The industry is pretty healthy.”
As indicated by the huge number of new micro-producers selling custom ARs at a variety of price points. Needless to say, huffingtonpost.com’s Tures can’t accept this common sense analysis, despite echoing it in his own article.
. . . folks are starting to realize that Barack Obama is not going to organize Jade Helm 15 to lock all conservatives in FEMA Death Camps in the basement of Wal-Marts or in the Michigan or Arkansas countryside (and yes, I’ve received those emails too). Assault weapons are not about to be eliminated across this country. But gun manufacturers will have a lot to be concerned about because the firearms issue isn’t just an ideology. It is, after all, a business as well.
The business of freedom has risks, but with all the new shooters flocking to gun ranges and, yes, gun stores, I wouldn’t bet against it.