Dick's Sporting Goods downgrade snares gun shares

Gun shares endured a double whammy Monday when slumping background check data and a retailer’s downgrade shook investor confidence.

Smith & Wesson’s holding company, American Outdoor Brands, closed 6 percent down. Sturm, Ruger and Co. and Vista Outdoor fell 3.5 percent and 1.9 percent, respectively.

The declines came soon after Barclays downgraded Dick’s Sporting Goods from equal weight to under weight, setting a new target price of $25, according to a report from Street Insider. Its share prices closed more than 5 percent down Monday.

Analyst Matthew McClintock blames the downgrade on the retailer’s inability to compete with department stores and other athletic apparel companies as trends shift from performance to style. He said this, coupled with ongoing weakness in hunting product categories and declining federal background checks, means investors should proceed with caution when considering Dick’s Sporting Goods.

Last month’s estimated gun sales — the sum total of transfers in the NICS’s handgun, long gun, multiple and other categories — exceeded 955,000, an 8 percent decline over last year and the slowest January recorded since 2012.

Background checks serve as a proxy measure for gun sales, however, the measurement isn’t perfect. Applications for concealed carry permits, periodic rechecks for maintaining licenses and a slew of smaller categories for pawns,  redemptions, rentals and other rare situations undercut the total amount of checks processed in one month.

These types of background checks have consumed larger percentages of the total amount recorded each month since the banner year of 2016, federal data shows.

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