2017 in review: The gun industry recalibrates

Handguns are displayed at the Ultimate Defense Firing Range and Training Center in St Peters, Missouri, some 20 miles (32 kilometers) west of Ferguson, on November 26, 2014. Paul Bastean, owner of the range, told AFP that business had grown as a result of anxiety about reaction to the jury announcement in the shooting death of 18-year-old Michael Brown. Typical sales of five to seven guns a day have risen to 20 to 30 in the last week, while gun-handling courses for November and December are fast selling out. Violence erupted in the St Louis, Missouri suburb for a second night on November 25 over the decision by a grand jury not to prosecute a white police officer for shooting dead Brown, an unarmed black teenager. AFP PHOTO/Jewel Samad (Photo credit should read JEWEL SAMAD/AFP/Getty Images)

In 2017, slumping demand hit gun makers and retailers hard as profits dwindled industry-wide. (Photo: Jewel Samad/AFP/Getty Images)

The gun industry took a few blows in 2017 as manufacturers and retailers alike endured slumping demand post-election. Share prices bounced, company leaders stepped down and legacy brands closed up shop – divesting fear-based advertising tactics in favor of promotions.

With the new way forward for gun makers uncertain, Guns.com takes a look back at the year that was for publicly traded companies across the industry.

Smith & Wesson/American Outdoor Brands

Legacy handgun manufacturer Smith & Wesson started off its most recent fiscal year standing in one pretty tall shadow.

After reporting record-breaking sales just shy of $1 billion last year – the industry’s biggest on record for background checks and, by proxy, gun sales – Smith & Wesson’s holding company, American Outdoor Brands, anticipated a post-election slow down would decrease annual earnings by as much as 17 percent.

So when the first quarter ended July 31 with $2.2 million loss, investors seemed unphased. With revenues down by as much as half in its firearms sector, top executives revised AOBC’s annual sales in 2018 down to no more than $740 million.

Three months later, sales tanked 36 percent over 2016. Market analysts described the company’s second quarter results as a “sobering up” for the industry – evidence the promotional environment would stick around far longer than anyone anticipated, forcing everyone, Smith & Wesson included, to compete.

“Is it resetting itself at any level? It’s just not clear yet, there is a lot of noise out there,” CEO James Debney said Dec. 7. “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.”

Most recent forecasted annual sales shrank to $650 million. The dwindling projections came amidst the resignation of Matt Buckingham, president of Smith & Wesson’s Firearms Division, on Black Friday – when background checks set a record pace of more than 203,000 processed on a single day.

Buckingham stepped down from his position effective Dec. 8 “to pursue other interests.” Debney will fulfill his duties in lieu of a replacement.

Share prices for AOBC fluctuated all year long, reaching a high of $24.45 in July – just after news of the company’s record-breaking fiscal year broke. As of Dec. 29, the gun makers stock fell by almost half to just under $13 a share.

Vista Outdoor

Vista Outdoor started off 2017 from behind. It’s fourth quarter 2016 ended March 31 with sales down 12 percent – a symptom then-CEO Mark DeYoung described as a “temporary lull” in the shooting sports industry.

Vista owns more than three dozen companies in firearms, ammunition and shooting accessories, including Savage Arms, Stevens, Federal Premium, Speer and American Eagle. It also holds brands in the outdoor lifestyle market.

That self-described lull gave way to double digit sales declines in Vista’s first and second quarters – ending July 2 and Oct. 28, respectively – and the ouster of not one, but two top executives at the company: DeYoung, himself, and Chief Financial Officer Stephen Nolan, who will step down as of Feb. 1, 2018.

DeYoung headed for early retirement in July while his replacement, Chris Metz – former CEO of Arctic Cat, a Minnesota-based snow mobile and all-terrain vehicle manufacturer – wasted no time reshaping the company’s footprint and leadership.

He first announced the elimination of Shooting Sports Segment President Bob Keller’s position “to allow its business leaders to drive changes faster and have clear line of sight to the goals at hand.”

Vista’s President of Firearms Al Kasper and President of Ammunition Jason Vanderbrink will lead the company’s shooting sports segment in Keller’s absence, Metz said.

“While I’ve only been here a short time, I realize we have much to do: we must make significant changes, act decisively, and move quickly to reposition and stabilize the company,” he told investors last month. “We will take an aggressive position on profit improvement through both margin expansion and cost reductions across all areas of the core business.”

The reduction includes divesting three brands in the company’s sports protection business: Bollé, Serengeti and Cébé.

“These brands were acquired as part of the Bushnell transaction in 2013 and focus primarily on fashion, prescription and safety eyewear, which are areas that we have determined are not core to our business,” Metz said. “The sale of these brands is expected to take place over the next few quarters.”

Vista anticipates its 2018 sales will not exceed $2.26 billion — a 2 percent reduction over first quarter guidance.

Stock prices from Jan. 1, 2017 plummeted from just under $40 per share to $14.96 as of Dec. 29 – up from the one-year low of just over $13 last month.

Sturm, Ruger and Co.

Even Sturm, Ruger and Co. – considered by many market analysts the strongest performer of the publicly traded gun makers so far this year – can’t escape the long shadow 2016 cast over the industry.

CEO Chris Killoy told investors last month the 53 percent decline in net profits — and the rest of Ruger’s financial statement, for that matter — proved just how “challenging” the third quarter was for the company, with little reprieve in sight.

“We offered more promotions that were moderately more aggressive than last year, but we did not chase our competitors’ offerings to achieve better short-term results,” he said. “We will continue to take a measured and thoughtful approach to sales promotions and rebate opportunities considering both the short-term benefits and the potential longer term implications both financial and reputational.”

The dismal results come after a strong first quarter for the company, which reported $167.4 million in sales — a 3 percent decline over first quarter 2016. Sales fell more than 35 percent to $104.8 million in the third quarter ending on Sept. 30, according to the company’s earnings reports. Second quarter sales likewise plummeted 22 percent. Overall, Ruger’s gun sales trail last year by nearly 20 percent.

Killoy told shareholders in May the company “has a consistent game plan” in good times and bad and expressed certainty the market would continue to fluctuate.

“The seasonality of our industry is very well defined, very well predicted and pretty much understood by those of us in the business,” he said. “Frankly, from a percentage standpoint, people have talked about the change in the firearms market since the November election, I think it would fair in saying the demise of the firearms industry was likely greatly exaggerated.”

“That first quarter, however, was not without its struggles. It was a very promotionally charged environment,” he added.

He cited “aggressive price discounting and lucrative consumer rebates offered by many of our competitors” as a continuing factor in Ruger’s second quarter decline.

“But our strategy is I think you know anticipate this type of downturn in the market and it’s a volatile inventory,” he told investors in August. “It’s not all gloom and doom. To their credit, retailers are healthier than they were a few months ago. Many had increased inventories in anticipation of a surge in demand following the elections last November. When that surge didn’t materialize, it’s understandable they took a deep breath and let their inventories decrease.”

Unit sell-through from independent distributors decreased by 16 percent in quarter three, Killoy said, mimicking a 10 percent decline in National Instant Criminal Background Check System applications during the same time frame. The industry uses NICS as a barometer for sales and the gun market’s overall health, although the measurement isn’t exact.

“We think there is a lot of good signs out there for us,” Killoy said, citing a growing, diversifying pool of gun owners. “We have to manage our way through this tough market we’re in right now, but with the new products that we have teed up and some of the things that are still on the drawing board, I like our chances better than the competition to be honest with you.”

Per Killoy’s forecast, Ruger’s stock bounced by more than $20 a share throughout the year — reaching a high of more than $68 in July before falling to just under $46 two months later, the 2017 low.

Outdoor retailers

Gun makers weren’t the only ones facing a new, unfamiliar reality in 2017. Some of the big box stores made major moves, forever changing the retail landscape for the gun industry.

In September, two iconic outdoor retailers — Bass Pro Shops and Cabela’s — became one after finalizing a multi-billion merger initiated in late 2016. With a combined 176 locations across the United States and Canada, the united chains will advance “key conservation initiatives,” CEO Johnny Morris said.

What will become of the 2,000 employees based at the Cabela’s headquarters in Sidney, Nebraska — about six hours west of Omaha — remains a question mark. The retailer employs more than a quarter of the town’s nearly 7,000 residents and economists have warned job cuts will come, but likely not at the store level.

Cabela’s laid off 70 employees in March, though Morris said he wants to retain “a significant presence” in Sidney.

Last year also saw the end of Gander Mountain in August when 162 locations nationwide closed their doors for good after a months-long liquidation sale ended.

Only 57 locations will re-opoen as Gander Outdoors, the re-branded effort led by Camping World CEO and star of “The Profit” Marcus Lemonis.

Gander Mountain, the brainchild of Robert Sturgis, an avid outdoorsman from rural Wisconsin, began in 1960 as a mail-order catalog for other shooting sport enthusiasts. After a 1968 federal law prohibited catalog sales of firearms, Sturgis grew the business to include camping and fishing gear.

Over the years, Gander moved headquarters to Minnesota and, by 2012, had branded itself as “America’s Firearms Superstore,” embarking on an aggressive expansion campaign to open 60 new locations across the country — a move Lemonis said ultimately led to the company’s downfall.

“I spent a day talking to a number of store managers and customers who have said that the current most recent management at Gander got really away from its core customer and really bet a $100 million on guns and was wrong,” he told investors in May. “Terrible, terrible inventory, terrible overhead, and candidly they didn’t need 160 stores.”

Gander Mountain filed for Chapter 11 bankruptcy protections in Minnesota court on March 10, indicating its intention to shutter 32 stores in 11 states and liquidate more than $500 million worth of assets.

Camping World, the nation’s largest recreational vehicle dealer, led the investor group that bought out $390 million worth of Gander Mountain assets, including its Overtons boating business, during an April 28 auction for $38 million.

In the weeks following, Lemonis changed the company’s name to Gander Outdoors, crowd-sourced a new logo and maintained an evolving list of surviving locations — down to 57 from a planned 70 — on his Twitter account. Meanwhile, the newly-branded company announced a slew of new product offerings designed to deliver on Lemonis’s promise to offer a larger assortment of guns at better prices.

The first of the reorganized stores opened Dec. 13 in Lakeville, Minnesota. Lemonis said he will open more than a dozen new stores through March 2018, with another 20 or 25 locations to follow through the end of September.

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