Jan. 16 (Bloomberg) -- Two years ago, John Webster decided to capitalize on soaring gun sales by opening a shop in Tempe, Arizona. Last year, realizing he could use his connections with machinists to undercut competitors, he got a manufacturing license to make his own silencers in nearby Mesa.
“I’m an entrepreneur,” said Webster, 34, owner of CTR Guns. “There is a very strong demand for firearms.”
The number of U.S. businesses licensed to manufacture firearms -- a designation that also allows holders to sell and customize guns -- doubled in the last three years even as dealer licenses rose 8 percent, according to data from the federal Bureau of Alcohol, Tobacco, Firearms and Explosives compiled by Bloomberg. President Barack Obama’s election and fears of new weapons restrictions after a rash of mass shootings have fueled record demand for guns and ammunition.
The surge in license applications occurred in cities throughout the country, with those in Arizona, Florida and Texas leading the way. The number of manufacturer licenses more than doubled in 41 of 76 cities with 50 or more gun dealers, including Mesa, where 1 in every 4 licensees can now make or customize guns, the data show.
“It plays into this insurrectionist ideology that is at the core of the gun-rights movement: If the government is going to shackle me, I’ll become my own gunmaker, my own gun dealer,” said Ladd Everitt, communications director for the Washington-based Coalition to Stop Gun Violence. “There has been a really strong resurgence in this type of mentality that started when Obama was elected president.”
The president today announced proposals aimed at reducing gun violence, including universal background checks on firearms buyers and a sales ban on assault weapons and high-capacity ammunition magazines, such as those used in the Dec. 14 slaying of 20 children and six adults at a Newtown, Connecticut, school and the July 20 shootings at an Aurora, Colorado, movie theater that left 12 dead and 58 wounded.
A grocery-store parking lot in Tucson, Arizona, was the site of a mass shooting in January 2011, in which then-Congresswoman Gabrielle Giffords, current U.S. Representative Ron Barber and others were wounded and six people, including a 9-year-old girl and a federal judge, were killed by a man wielding a semi-automatic handgun with a high-capacity magazine.
In Arizona, permits aren’t needed to carry a concealed firearm, guns are allowed in bars and there are no state limits on gun purchases. In her State of the State address this week, Republican Governor Jan Brewer said the state had reduced crime by “punishing criminals, and not by infringing on the rights of law-abiding gun owners.”
Since the Newtown shooting, firearms dealers have reported soaring demand for high-capacity magazines and assault weapons in anticipation that the federal assault weapons ban, in place from 1994 to 2004, may be reinstated.
Prices for handgun magazines surged on EBay and semi-automatic rifles were sold out at some Wal-Mart stores within days of the massacre. On the website for Fort Worth, Texas-based discount gun dealer Cheaper Than Dirt!, all 15 of the AR-15 Bushmaster semi-automatic assault weapons were listed as “out of stock” last night.
Background checks performed before gun purchases hit a record high in December, up almost 59 percent from a year earlier, to 2.2 million. The previous record was set in November, the month Obama was re-elected, according to federal data adjusted by the Newtown, Connecticut-based National Shooting Sports Foundation, an industry group, to eliminate checks not related to purchases. There were 13.8 million in 2012, up 28 percent over 2011, according to NSSF’s data.
Increased demand for guns started before the recent tragedy, beginning after Obama’s first election in 2008, said Thomas Mangan, special agent in the Phoenix Field Division of the firearms bureau. Businesses seeking federal firearms licenses are responding to the booming marketplace -- including a strong demand for customized, high-powered rifles, he said. The manufacturing license gives businesses more flexibility, including the ability to customize assault weapons.
“It’s driven by supply and demand, ultimately, and fear that those guns may not be available,” Mangan said in a telephone interview. “Arizona is a hunting state. It’s a gun state. There is a great deal of interest in guns here.”
As of this month, 69,957 individuals and businesses have licenses from the U.S. firearms bureau to sell, make or import firearms, ammunition or destructive devices, not including antique collectibles. The number of all such licenses increased more than 15 percent nationwide and more than doubled in two U.S. cities over the past three years, rising to 53 in Charlotte, North Carolina, and 55 in Lake Havasu City, Arizona, the data compiled by Bloomberg show.
There are 7,811 licensed firearms manufacturers in the U.S. as of this month, up from 3,718 in January 2010, according to data compiled by Bloomberg -- 11 percent of all firearms licensees, up from 6 percent of the total in 2010.
In Phoenix, the number of manufacturers doubled to 45 -- or almost 1 in every 5 licensees -- in the three-year period from January 2010 to this month.
Arizona cities including Chandler, Gilbert, Mesa, Phoenix, Prescott, Scottsdale and Tucson recorded double-digit increases in the number of federal firearms license holders. Scottsdale had the highest concentration of licenses among cities with more than 150,000 people, with 4.5 license holders for every 10,000 residents.
Houston, with 1.9 licensees per 10,000 people, had the highest concentration for cities with more than 1 million residents. Among all cities with more than 50 federal firearms licensees in 2013, Wasilla, Alaska, had the highest concentration. The town 43 miles from Anchorage that was home to 2008 vice presidential candidate and gun enthusiast Sarah Palin had 62 federal firearms license holders, or a rate of 77 per 10,000 people.
The number of gun shops in Aurora, Colorado, the site of the July shootings, surged more than 40 percent in the three-year period.
At the NSSF’s trade show in Las Vegas yesterday, the group’s president said the industry is “in a word, misunderstood.”
“For it is us, above all, who do not wish to see our products misused,” Steve Sanetti said, according to a copy of the speech posted on the organization’s website.
License-holders are increasing because the gun industry presents good business opportunities, said Mike Bazinet, a spokesman for the shooting sports group, which has 8,000 members including firearms manufacturers, retailers and range operators.
“I think what you are seeing is a response to market demand,” Bazinet said in a telephone interview, noting that firearms ownership has increased over the last decade. Gun manufacturers “outperformed just about every other sector during the years of the recession,” he said.
Sales at Smith & Wesson Holding Corp., the largest publicly traded firearms maker, jumped 20 percent in fiscal 2012 to a record $412 million, according to data compiled by Bloomberg. Analysts project revenue at the Springfield, Massachusetts-based company to jump another 35 percent through the year ending in April to $557 million.
Sturm Ruger & Co., maker of the Ruger Mini-14 rifle, posted a record profit in 2011, data compiled by Bloomberg show. The Southport, Connecticut-based company, which also has operations in Prescott, Arizona, boosted net income by almost 60 percent last year to $63.6 million, according to analysts’ estimates.
The surge in revenue and profit was driven by consumers’ bets on Obama’s re-election and the greater likelihood of stricter gun laws with a Democratic president, said Rommel Dionisio of Wedbush Inc.
“Essentially, if the consumer thinks that an assault rifle ban is coming, then he is rushing out to buy an assault rifle,” the New York-based analyst said in a telephone interview. “That’s what’s been occurring, even before Newtown.”
U.S. firearms manufacturing soared from 2004, when the decade-old assault weapons ban expired, to 2011, according to U.S. firearms bureau data reported last week.
There were 2.6 million pistols made in the U.S. in 2011 -- almost four times as many as in 2004. Almost a million more rifles -- including semi-automatic assault weapons -- were produced in 2011 for a total of more than 2.3 million, up 74 percent.
Matt Beck, a 37-year-old commercial airline pilot, joined friends in getting a manufacturer license last year with hopes of opening a storefront in Mesa where he could also customize assault weapons.
So many of his friends in Arizona shoot and buy a lot of guns, they thought it was an easy way to make some extra money. In the rush on firearms following the Newtown tragedy, though, the supply with which he hoped to open Apocalyptic Arms has disappeared. High-capacity magazines are sold out. AR-15s are going for three times as much as before the shooting.
“Because of the panic that is happening, there is no inventory,” Beck said. “Everybody is scared that rifles are going to be taken away. It’s sent everybody in the gun community to just go buy.”
He will have to delay the opening of his shop, which he might not have pursued if he’d known what was going to happen, Beck said. “We just don’t have anything to sell right now,” he said.
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