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Guns and Ammunition Whisper

Guns and Ammunition Whisper
 

Research Question: Will concerns over gun legislation and low ammunition inventory lead to a slowdown in sales or spur the industry to continued strength in 2014?

Companies Covered: Sturm, Ruger & Co. (RGR), Smith-Wesson Holding Co. (SWHC), Alliant Techsystems (ATK), Olin Corp. (OLN)

Report Available: February 14, 2014

 

Blueshift’s observations indicate continued strong sales of guns and ammunition despite legislative and inventory pressures working against it, placing the direction of the industry in 2014 in question.

 

Observations

  1. Despite, or perhaps because of, increased scrutiny, there has been a period of secular growth in sales by firearm and ammunition companies over the past several years. SWHC beat Q2 EPS and revenue expectations on a 28% increase in gun sales, with continued strong guidance for Q3. Although the pace of gun sales has slowed compared to recent quarters, demand remains strong. Some attribute the increase in the sales of firearms and ammunition to “one time” factors including a rush to purchase firearms before new legislation takes effect in 2014.
  2. As the gun safety debate carries on, biometrics for firearms has gotten increased attention from legislators and safety groups as a potential contributor to reducing violence and tragic outcomes. Also, SWHC said it will not sell new models of its semi-automatic handguns in California to avoid complying with a new state law requiring microstamping. Instead it expects sales of its compliant guns to make up the difference. And there is growing popularity in non-lethal methods of personal defense, including electronic devices such as Tasers and pepper spray. This could indicate possible lost market share in the lethal weapons segment.
  3. In Blueshift’s Sept. 2013 report, sources reported that gun sales would continue at a strong pace, but not at the record-setting levels of 2012 and 2013. Many sources said current market conditions have created a new normal for annual sales growth in the firearm industry of 15% to 20% per year vs. previous expectations of 10% to 15% per year, suggesting a secular growth trend. We also found that ammunition sales had been hampered by low inventory and was slowly being rebuilt. Sources said the ammo shortage would not be resolved for another 12 to 18 months.

 

To further assess the direction of sales of guns and ammunition, Blueshift will gather data and issue a market research report from independent sources in the following areas: wholesalers, supply chain, gun store owners and executives, gun store managers and employees, and industry specialists.

 

To see other ideas Blueshift Research is currently working on, please click here.