A selection of AR-15 style rifles hang on the wall at the R-Guns store in Carpentersville, Illinois, January 11, 2023, one day after the state ban.
Armando L. Sanchez | Tribune News Service | Getty Images
The largest firearms manufacturers in the US are facing a post-Covid crisis.
Gunmakers saw big gains in recent years as Americans experienced feelings of insecurity and instability amid the pandemic, protests against police killings of unarmed black people, and the 2020 presidential election. But gun sales have plummeted over the past year as demand declines.
related investment news
American outdoor brands and View Outside have recently reported weaker sales in their shooting categories. Sturm, Ruger & Companythe largest publicly traded arms maker in the US by market value, reported a 28% year-over-year decline in net sales for the fiscal third quarter, reporting $139.4 million, down from $178.2 million in the same period in 2021.
“These declines are attributable to reduced consumer demand for firearms from the unprecedented surge that began in 2020 and continued through most of 2021,” CEO Christopher Killoy said of the company’s financials in November during an earnings call.
The gun ownership rate, as measured by background checks for gun purchases, rose to 21 million in 2020, an industry record high, according to the trade group National Shooting Sports Foundation. In 2019, there were only 13 million.
There were a total of 18.5 million background checks for gun purchases in 2021, the second largest year in the industry. In 2022 there were a total of 16.4 million.
NSSF warns that background checks are not a perfect equivalent of ownership because not all background checks are related to individual new gun sales, but they are the best barometer of annual sales trends. The organization has been keeping records since 2000.
“During the pandemic, people were somehow concerned about the breakdown of society,” said Dru Stevenson, a law professor at South Texas College of Law Houston. “If you didn’t have a gun and you decided to buy one for self-defense, you went and bought your gun, and now you’re done.”
Declining sales, along with rising material and production costs, depressed manufacturers’ profitability.
Sturm saw Ruger tighten its gross margin to 28% in the third quarter, compared to 36% in the same period a year earlier. Sturm, Ruger & Company did not immediately respond to UKTN’s request for comment. The company will publish its next quarterly results on February 22.
“We see that when you come off the highs, the market settles down and we find that new normal,” said Mark Oliva, general manager of public affairs at NSSF. This “new normal,” Oliva added, is what gun manufacturers are trying to get their shareholders to understand.
Gunmaker Smith & Wesson reported second quarter net sales of $121 million, a decrease of 47.5% from the same quarter last year. However, the company added that those results are still 6.4% higher than the comparable quarter in fiscal 2020, pre-pandemic. Smith & Wesson did not immediately respond to UKTN’s request for comment. The company will report its next set of quarterly results on March 2.
On a conference call with investors in December Smith & Wesson CEO Mark Smith said that while firearms sales are reaching “more normal levels of demand,” the company’s business model is “designed specifically for this” and “has weathered these cycles effectively before.”
Smith & Wesson’s stock is down 40% from a year ago, while Sturm, Ruger & Company saw its share fall 19% over the same period.
Other major gun manufacturers, including American Outdoor Brands and Vista Outdoor, which bought Remington Ammunition out of bankruptcy in late 2020, are seeing similar declines in gun sales.
American Outdoor Brands reported quarter-over-quarter net sales of $54.4 million, down $16.3 million, or 23.1%, from net sales of $70.8 million in the same quarter last year , “primarily due to reduced demand in the shooting sports category.”
Vista Outdoor reported a 4% drop in sales to $432 million for its sports products, including the Remington acquisition.
UKTN reached out to American Outdoor Brands and Vista Outdoor for comment.
Still, Oliva said the “floor of this new market” remains “higher than the ceiling” of the previous market and that many of the losses now perceived are likely to be recouped in the next uptick in sales, which he believes will come during the Presidential Election 2024.