The purported “war” on the Second Amendment largely faded in Washington, D.C., when Congress scuttled gun-control legislation this spring, but it’s still registering sharply in gun-industry profits. Just check out Smith & Wesson Holdings (SWHC) and its impressive numbers from its last fiscal year: a record $588 million in sales—43 percent above fiscal 2012—with expectations of even higher revenue in the year ahead.
Stoked largely by gun enthusiasts’ fears that the federal government will restrict firearm sales—a prospect wholly unrealized thus far in the 4½ years of President Barack Obama’s tenure—gunmakers have seen consumer demand far outpace supply. Both Smith & Wesson and a large rival, Sturm, Ruger (RGR), are selling all the firearms they can manufacture and have worked to expand production. Smith & Wesson’s president and chief executive, James Debney, told analysts Tuesday evening that “sales have been constrained by the rate at which we can intelligently add capacity.” The Springfield (Mass.) company says fiscal 2014 should see sales top $600 million.
The story was much the same at Ruger. The company’s 2012 sales surged (pdf) to $492 million, 49 percent higher than in 2011, and net income has nearly tripled since 2010. Smith & Wesson likewise saw profit for the year set a company record at $81 million. Gun buyers also appear willing to spend without too much concern about price: Smith & Wesson’s profit margin approached 40 percent last year. Demand has been so robust that Ruger even had to suspend orders for two months last year, citing a huge backlog of more than 1 million guns. Ruger said that FBI background checks under the National Instant Criminal Background Check System rose 46 percent in the first quarter; Smith & Wesson says those checks have risen each month for the past three years.
The gun trade’s boom has been fueled in large measure by the fevered debate around firearm-control measures, an argument that was revived after the December massacre of more than two dozen children and staff at Sandy Hook Elementary School in Newtown, Conn. In April, the U.S. Senate failed to muster sufficient votes to tighten background checks, cementing the reality that gun-control remains politically poisonous in Washington, where the National Rifle Association retains enormous clout. Helping that political cause, both Ruger and Smith & Wesson post prominent links on their websites to urge browsers to write their congressional representatives. “Take the next step to protect your rights,” Ruger says. “Preserve America’s Rights,” Smith & Wesson urges.
The profits fit with fears among the pro-gun community, particularly among older people, that firearms may no longer be available for purchase, according to the results of a survey of first-time gun buyers released this week by the National Shooting Sports Foundation. The defense of one’s home topped the reasons for new buyers to acquire a gun at 87 percent, followed by personal protection (77 percent) and “the desire to share shooting activities with family and friends” (73 percent). First-time gun buyers spent an average of $515 for the weapon and $504 for accessories, the survey found.