Smith & Wesson: Promotional buyer's market unsustainable

American Outdoor Brands said Thursday the promotional activity undercutting earnings strengthened in some categories, despite hopes industry-wide the rock-bottom prices would lift by now. (Photo: Getty Images)

A top executive for Smith & Wesson told investors last week the promotional buyer’s market isn’t sustainable — despite indications the current environment won’t change anytime soon.

James Debney, chief executive officer of American Outdoor Brands — the gun maker’s holding company — said Thursday the promotional activity undercutting earnings even strengthened in some categories, despite hopes industry-wide the rock-bottom prices would lift by now.

“From our belief, this promotional activity is here to stay,” he said during a conference call with investors. “And like it or not, as it compresses our margins, reduces our revenue, we’re going to have to participate to some degree.”

American Outdoor Brands stock plummeted 14 percent in after hours trading Thursday after company executives reported second quarter sales declined more than 36 percent over 2016.

Chief Financial Officer Jeffrey Buchanan also revised the company’s annual sales forecast down to $650 million— well below previous estimates of $740 million.

“We recently have … worked on our promotions for the typical period in early winter,” Buchanan told investors Thursday. “And it just appears that the way we do those is we give away on free goods with packages of purchases. And it just appears that we’re going to have to give away more free goods than we originally thought even a couple of weeks ago.”

By comparison, American Outdoor Brands raked in $903 million last year — an unprecedented season for the gun industry as mass shootings, looming regulations and an anticipated Democratic electoral victory spurred record-breaking consumer demand.

Since the election, however, manufacturers and retailers alike have been struggling to define the “new normal” under a gun-friendly presidential administration and an apparent return to historical sales patterns.

“Is it resetting itself at any level? It’s just not clear yet, there is a lot of noise out there,” Debney said Thursday, noting similar trouble for competitors. “I mean, nobody of any scale — and those are really the ones that we pay attention to — has gone away. Everybody is still in business. Some that publish their results, you can see they’re not doing so well. How long they can sustain themselves, we just don’t know.”