Gun companies have had a rough year, and it doesn’t look like things are going to pick up anytime soon.
As if the industry’s struggles weren’t enough all on their own, it now seems that market analysts are less than thrilled with the industry’s prospects as we move into the second year of the Trump presidency.
Maksim Netrebov, founder of New Jersey-based Maks Financial Services and contributor at Seeking Alpha, slammed the gun maker’s holding company, American Outdoor Brands, in a Dec. 11 article for evading questions regarding why the lowered guidance came only now — and not a year ago when President Donald Trump’s electoral victory left the industry flush with inventory and short on demand.
“If we are on the Titanic, the Iceberg is now visible, it is too late to stop the ship and the deck chairs are arranged,” he said. “The industry demand is deteriorating both significantly and quickly, the companies bet wrong and are now sitting on massive inventories, even larger manufacturing capacities which they spent billions on, and are playing ‘chicken’ with each other seeing who will blink first and cut their production.”
Those companies — American Outdoor Brands, Vista Outdoor and Sturm, Ruger and Co. — have all reported diminished earnings over the last year, citing a return to seasonal sales patterns after lingering promotions die down, presumably by the year’s end.
As 2018 fast approaches, however, American Outdoor Brands CEO James Debney told investors the rock-bottom pricing will stick around awhile longer — a sentiment echoed by top executives at Vista and Ruger in November.
“We are not yet seeing the recovery that we expected to see,” said Vista Outdoor Chief Financial Officer Stephen Nolan during a conference call with investors Nov. 9. “Shooting sports has always been a cyclical industry with periodic downturns lasting anywhere from 12 to 24 months. While we may not be at the bottom as of yet, we believe that we are very close and we anticipate that the market will show returns to growth over the next 18 months.”
The key question here is just why there’s a downturn.
If this is indeed a “Trump Slump” as some contend, could this downturn last for another three years or more? It’s possible, but few can be really sure that’s the problem.
Indications are that guns actually are selling. That tells us that the idea of the Trump Slump is probably not right. Guns are being sold.
However, the issue appears to be one of inventory. Companies made way too many guns, spinning up production, probably anticipating a Hillary win and the ensuing push for both gun control and new firearms for those who want to beat out any new legislation.
But Hillary didn’t win.
As a result, the startling demand that companies expected never came.
This will provide some good for consumers since prices will remain low to purge out that inventory, but it won’t be great for the companies who will make less money. Too little, and they won’t be there any longer, and that’s not good for anyone not named Michael Bloomberg.
Ah, the joys of business.