For years, Mainstreet Guns & Range couldn’t sell assault rifles fast enough.
About the time President Barack Obama took office, buyers flocked to the store in Lilburn, Georgia, to stock up because of concern that federal lawmakers would tighten gun laws, a worry that only grew after the 2012 Connecticut school massacre. Now, with the political impetus waning for new restrictions, the rush for firearms is ebbing too.
“Assault-rifle sales stopped in their tracks,” Jim Hornsby, owner of the suburban Atlanta store, said as muffled gunfire popped off from the attached shooting range. He estimated sales of the long guns are off 70 percent from last year. “It’s hard to give an AR away.”
Plummeting sales of assault-style weapons, also known as modern sporting rifles or “black rifles,” has led to an oversupply of unsold guns and is hitting the bottom lines of the big arms producers. Smith & Wesson Holding Corp. (SWHC) shares yesterday fell the most in more than two years after the Springfield, Massachusetts-based gunmaker slashed its full-year sales and profit forecasts.
The revision underscored the strains on the industry after top producer Sturm, Ruger & Co. (RGR) missed analysts’ quarterly earnings and revenue estimates in July.
Smith & Wesson fell 14 percent to $11.32 yesterday at the New York close, its biggest decline since May 8, 2012. Sturm Ruger dropped 3.5 percent to $49.25. The Southport, Connecticut-based company has plunged 33 percent this year.
Assault-rifle sales are falling after a huge run-up last year over concerns that legislators would put restrictions on the weapons following the December 2012 mass killing at Sandy Hook Elementary School in Newtown, Connecticut. More recently, lawmakers have pulled back on threats of new assault-rifle legislation.
“Everybody wanted to buy one before Congress passed legislation that might take away the right to have one. Of course, Congress never passed that legislation,” said Andrea James, a Minneapolis-based analyst for Dougherty & Co., who lowered her rating on Smith & Wesson yesterday to neutral. “The best thing for firearms demand is to have the constant threat of legislation without ever actually having the legislation.”
Gun owners and the National Rifle Association have fought efforts to renew the 10-year federal ban on assault weapons that expired in 2004, including a bill introduced last year by Senator Dianne Feinstein, Democrat of California.
As enthusiasm for stricter gun control has subsided, prices for the long guns have slumped and desperate wholesalers have offered incentives like “buy four, get one free,” said Hornsby, 64. During the rush, he had to pay wholesalers incentives to get access to inventory.
“There’s not an immediate fear the government’s going to take them away so sales are back to a more traditional pace,” said Hornsby, whose store displays about 850 gun models. Assault rifles more expensive than $700 are the hardest to sell now, he said.
Requests for criminal background checks for gun purchases, a gauge of interest in firearms, averaged 1.75 million a month in 2014 through July, according to U.S. Federal Bureau of Investigation data, down 3.8 percent from a year earlier.
Smith & Wesson’s sales fell 23 percent to $131.9 million in the quarter ended July 31, the company said, missing the $134 million average analyst projection. The company, the second-largest publicly traded firearms maker, said slumping sales of long guns, including modern sporting rifles, drove 87 percent of the revenue decline. Net income dropped 45 percent to $14.6 million, or 26 cents a share, beating the 25-cent average analyst estimate.
Sales will be $530 million to $540 million in the fiscal year ending in April, the company said, backing off a previous forecast of $585 million to $600 million. Annual earnings will be 89 cents to 94 cents a share, instead of the $1.30 to $1.40 seen earlier.
Smith & Wesson did benefit from demand for small, polymer pistols and revolvers. Over the past decade, handgun sales have risen industrywide amid increasing “concealed-carry” permits and a growing number of female gun customers. Hornsby hung white ceramic deer and moose heads in his hunting section to appeal more to women, who make up 37 percent of his sales, he said.
“Gun ownership has become normalized among a greater demographic,” said James, adding that the long-term trend is still favorable for gun makers. “Are people buying as many guns this year as they were last year? No. Are people buying more guns than they were three years ago? Yes. The industry is pretty healthy.”