Smith & Wesson: Promotions, not fear driving gun sales

smith and wesson 2017 winter promotion ad

An advertisement for a Smith & Wesson winter promotion. The gun maker’s holding company said promotions are the new normal, meaning diminished profits for the industry. (Photo: Smith & Wesson/Facebook)

The record-breaking background checks processed Black Friday proved buyers will wait for the best deal — a new equilibrium for the industry, according to American Outdoor Brand’s Chief Executive Officer James Debney.

Debney told investors Thursday the 203,000 applications submitted to the National Instant Criminal Background Check System Nov. 24 infused encouragement into a sluggish gun market — potentially upending eight years of fear-based buying in favor of promotions.

“This result reinforces arguably that firearms have moved even more strongly into the basket of Black Friday shopping goods that consumers have come to expect,” he said. “Accordingly, we believe promotions have, for the moment, replaced fair based buying as a primary driver for consumer purchases and the promotional environment for consumer firearms looks as though it will continue for the foreseeable future.”

Dealers processed 203,086 applications through NICS during Black Friday’s traditional shopping frenzy. The system serves as the gun industry’s best sales barometer — though the measurement isn’t exact.

Six of the FBI’s top 10 days fall on Black Fridays, including the most recent record of 185,713 checks set just last year. It’s the third year in a row Black Friday checks earned the top spot on the agency’s list of highest days.

“You can look at Black Friday NICS and say yes, that’s really encouraging, that’s a bright spot,” Debney said. “So the positive take from that is yes, there is still a consumer there that has an appetite to buy a firearm, but they’re willing to wait until they can get the best possible deal.”

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.

The rugged outdoors conglomerate counts Smith & Wesson as its top-earner in a portfolio of more than two dozen brands including Gemtech, Crimson Trace, Bubba Blade and Old Timer.

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

Estimated gun sales rose 30 percent last month, according to federal data — an encouraging sign, Debney said, despite the company’s conservative revision.

“Our belief is … there was some fear-based buying that would take place from time to time and there is no fear-based buying right now,” he said. “We believe the level of promotional activity at the heightened level of it is has really replaced fear-based buying as the primary driver for a consumer who wants to acquire a firearm.”

Dealers processed more than 2.3 million applications through NICS in November — a 17 percent increase over October.

The strong sales data makes November this year’s second busiest for background checks so far. Last month’s sales trail 2016, the industry’s biggest on record, by 13 percent, though it still ranks as the second highest November in the background check system’s two-decade history.

“It’s going to be interesting as these promotions diminish, which they will overtime — they have to, they’re unsustainable — where do we settle out in terms of the size of the market,” Debney said. “And we just don’t know.”

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