Smith & Wesson not crediting a ‘surge’ in sales for Q4 success

Following months of record highs for purported gun sales, Smith & Wesson closed out its fourth quarter with a 22.2 percent increase in sales, but the company dismissed claims that it’s due to a surge in demand.

“We have chosen not to define that period as a surge,” said James Debney, Smith & Wesson’s president and chief executive officer, in response to whether the company saw a surging or de-surging market in the last three months.

“Definitely it was a period of heightened demand, but I think there was some very different dynamics at play, and you could see normal seasonality at play, as well, as you think about the tail end of our third quarter and our fourth quarter,” he continued.

In the fourth quarter, Smith & Wesson reported $221.1 million in sales, but that includes $17.5 million in accessory sales. Still, the company’s bump in sales correlates with record high background check figures. However, the raw numbers are inflated with administrative tasks such as permit checks, which have been a substantial portion of the totals reported this year. Remove those and the adjusted figure better represent guns sold from licensed dealers.

The fourth quarter covered trade show season — January through the end of April — a time company representatives met with customers, retailers and distributors. In that timeframe, the federal background check system processed more than 3.9 million checks. Smith & Wesson’s firearm sales amounted to $210.1 million, up $37.3 million from the year before.

The company’s third quarter covered holiday shopping season and raked in $194.7 million from gun sales, up by $70.2 million from the year before. Starting in November and through the end of January, more than 5.04 million checks were processed before sales.

Sturm, Ruger & Company’s fourth quarter also covered Christmas shopping season and the competing gun maker reported $152.4 million in sales, an increase of $29.8 million from the year before.

In Smith & Wesson’s fourth quarters for fiscal years 2013-2015, the company reported $178.8 million, $170.4 million and $166.4 million — an average of $171.8 million. That same timeframe had an average of 3.76 million checks — 3.46 million in 2015, 3.48 million in 2014, and 4.33 million in 2013.

The data shows consistently high figures for sales and background checks during the company’s fourth quarter, but a deeper reading into the time period is needed to better understand the driving force behind the activity. Yet, politics has been widely cited as influencing gun buyers since the 2012 Sandy Hook shooting, but it seemed heightened political rhetoric has lost its potency.

While the recent Orlando shooting re-ignited calls for an assault weapons ban, it’s still unclear the affects it has had on consumers who in the past bought items because they were targeted in legislation. Some gun sellers have said they sold upwards of 30,000 AR rifles in the week after the tragedy, but it seemed to have had little affect on Smith & Wesson’s stock price.

The Friday before the June 12 shooting, price per share cost $21.41 and then predictably jumped when markets opened the following Monday to $22.88, but returned to the initial price on Tuesday and remained there until Friday, when the company released positive financial results.

However, in previous conference calls with investors, Debney has always been hesitant to overestimate trends and instead describes the market as “normalized” or following “seasonal patterns.”

Smith & Wesson’s chief financial officer, Jeff Buchanan, followed that same train of thought answering the surge or de-surge question.

“We don’t make assumptions about things out of our control. If I accepted (the) premise that there was a surge and now we’re in a de-surge, then I would have taken that into account because that is something we know,” he said.

“But if there’s going to be a surge in the future, we don’t know that, and we don’t take that into account,” he said.

Article updated June 23, 2016 at 8:11 am EST