Background checks on track for second busiest year on record

With less than two months remaining in 2017, the National Instant Criminal Background Check System appears on track for its second busiest year ever.

Gun dealers submitted just over 20 million applications to NICS through Oct. 31 — about 9.5 percent behind 2016, the single biggest year for background checks, and by proxy gun sales, in the system’s two-decade history.

Estimated gun sales — the sum total of applications submitted to the federal system for its handgun, long gun, multiple and other categories — surpassed 10.1 million last month. Compared to last year, sales declined 12.5 percent.

The numbers reflect an industry still re-calibrating under “a new normal.” President Donald Trump’s victory stunned gun makers and retailers alike, many of whom amassed inventory in preparation for a Democratic electoral sweep and the heightened demand it would bring.

Instead, prices tanked as dealers tried to unload product throughout the year. Background checks ebbed and flow more in line with historical trends — a steady sales uptick in winter that bottoms out over the summer, resuscitated in the fall as hunting seasons kick-off.

The industry’s most profitable weeks — aside from short bursts of demand following mass shootings, terror attacks or congressional action — set in Black Friday and extend throughout the holiday shopping season.

Eight of the 10 busiest days in NICS history occurred in November and December, according to federal data. Four of those dates — including its strongest day ever, Nov. 25, 2016 — fell on a Black Friday. Dealers submitted 5.3 million checks in the last two months of 2016 alone.

A robust selling season could upend a year of double digit losses for top gun makers — including American Outdoor Brands, Vista Outdoor and Sturm, Ruger and Co.

“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 earlier this month. “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.”

Estimated sales in October topped 1 million for the first time in six months, federal data shows. Dealers transferred just under 520,000 handguns and more than 480,000 long guns — the busiest month for the category so far this year.

Top gun makers never doubted the ongoing weak demand would eat into their bottom lines. This year’s comps will be particularly difficult given the politically-charged environment bolstering the industry in the run-up to the 2016 election, Ruger CEO Chris Killoy told investors earlier this month. His company’s earnings fell 53 percent last quarter, the gun maker’s second double digit loss this year.

Likewise, American Outdoor Brands — the holding company for Smith & Wesson — forecasted annual profits will shrink more than 18 percent. The company plans to release its latest quarterly earnings Nov. 30.

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