Investors concerned about Remington’s inventory glut

The sudden slowdown of gun sales causing a surge in inventory levels has investors concerned about the earning potential for Remington Outdoor Company.

During a conference call Wednesday, many prodded Remington executives about the health of the company, which finally reported results in the black following two years of paying relocation costs, amid an unstable market.

“Because of the current market conditions, we continue to make prudent business decisions surrounding our continued cost management activities as well as reducing production rates on certain product lines in our factories,” said Steve Jackson, Remington’s chief financial officer.

Remington consolidated most of its 16 brands to a facility in Huntsville, Alabama, two years ago intending to save on operating costs, but last month used the same argument to layoff more than 170 people.

For Fiscal Year 2016, which coincides with the calendar year, Remington reported $18.9 million in profit, up from the $135.2 million loss the year before due to relocation costs.

During the fourth quarter, gun sales followed seasonal trends but failed to perform at surging levels seen in years’ prior, according to federal data reviewed by Guns.com.

Jason Lindell, Remington’s vice president of financial planning and analysis, said the company finished the year with higher inventory levels for both firearms and ammunition than the year before, like many other gun and gun-related companies anticipating a Democrat winning.

“A portion of that was planned as we were finishing our transition as well as our new products, but the bulk of the increase was associated with slower sales in the last part of that quarter,” he said.

Lindell explained it’s unclear when sales patterns will level out. “We don’t have a firm position (on when the markets will stabilize),” he said and suggested looking at Y2K as a close example of the market’s current situation.

“(The gun industry) had slowdowns before that happened after, if you will, election time or surges due to market things, I think quarters, but we have seen it last upwards to a year, maybe a little over a year before,” Lindell said.

Gun sales in 2000 declined by 10 percent. Yet, it may be too early to tell how Y2K panic buying compares to last year. Three months into, 2000 gun sales decreased by 1.6 percent whereas the change in 2017 has been much more dramatic, dropping by 11.6 percent.

Following November’s surprising presidential election results, gun sales continued at a higher seasonal rate but failed to materialize at levels Remington and other gun makers prepared for. With the supply chain clogged at the wholesaler and retailer levels, manufacturers must either wait for product to move or lower prices. In Remington’s case, executives want to focus on promotional and value items.