Stocks for Dick’s Sporting Goods tumbled 17.9 percent Tuesday after the company blamed tightened profit margins on the promotional retail environment post-election.
Chairman and CEO Ed Stack’s forecast over the weekend that earnings “will be painful for awhile” — at least through the rest of its fiscal year — sent gun manufacturers American Outdoor Brands and Vista Outdoor into decline, too.
AOBC counts Smith & Wesson as the top earner in its growing portfolio of “rugged outdoor brands.”
Vista owns more than three dozen companies in firearms, ammo and shooting accessory companies, including Savage Arms, Stevens, Federal Premium, Speer and American Eagle. It’s stock dropped 1.5 percent compared with AOBC’s 1.7 percent decline Tuesday.
Dick’s reported second quarter net income of $112.4 million, 23 percent higher than 2016. Net sales increased 9.6 percent to exceed $2.2 billion.
“In this very competitive and dynamic marketplace, we were able to deliver a significant increase in our bottom line from last year,” Stack said. “By design, we will be more promotional and increase our marketing efforts for the remainder of the year, as we will aggressively protect our market share.”
Vista and Sturm, Ruger and Company reported double digit losses for the most recent quarter. Both companies expressed uncertainty at how much longer overstocked inventory would hang around.
“I’ve been in the industry for more than 40 years and this is the most unique retail environment I’ve ever seen,” said Michael Callahan, Vista’s interim CEO, earlier this month. “We’re seeing unprecedented change and it’s not likely to go back.”
“I don’t know where that new normal is going to shake out at,” said Chris Killoy, president, CEO and director of Ruger, in a conference call with investors earlier this month, regarding firearm demand under a new presidential administration. “We see some good long-term trends that we haven’t seen maybe in the past.”
AOBC, however, raked in a record-breaking $903.2 million through the end of the fourth quarter, a 25 percent increase overall — though CEO Jeff Debney warns the promotional environment will eat into 2018’s bottom line by as much as 17 percent.
“Right now, we’ve got to really wait until the fall to understand how strongly that consumer returns to the retailer and their appetite for buying firearms,” he said. “So that’s really where we find ourselves right now.”
Estimated gun sales plummeted 26 percent in July compared to last year as manufacturers and retailers predict a return to the industry’s “seasonal trends” in the non-election year.
The Federal Bureau of Investigation processed just north of 1.7 million applications through the National Instant Criminal Background Check System last month.
June gun sales likewise dipped 12 percent over 2016 to just over 947,000 estimated transfers, according to the FBI. The gun industry uses the system as a proxy measure for sales.