Smith & Wesson’s sales plunge to lowest level in 13 years, stock falls toward 2-year low

Smith & Wesson Brands Inc. reported its lowest quarterly sales total in more than 13 years Thursday, sending shares lower in after-hours trading, as gun demand cools from an early pandemic surge.

Smith & Wesson
SWBI,
-5.96%

reported fiscal first-quarter net income of $3.3 million, or 7 cents a share, on sales of $84.4 million, down 69.3% from $274.6 million a year ago. After adjusting for spinoff expenses and other costs, the firearms maker reported earnings of 11 cents a share.

Analysts polled by FactSet expected adjusted earnings of 21 cents a share on sales of $129.8 million.

Smith & Wesson stock closed with a 1% decline at $13.43. Following the announcement of the results after hours, shares fell lower than $12 — a level the stock has not fallen to in regular trading since mid-2020 — then rebounded back above that level, though still down 6%.

The quarterly revenue total was the lowest Smith & Wesson has reported since the quarter that ended in January 2009, according to FactSet records. The gun company had not reported less than $100 million in quarterly net sales since the January quarter of 2012.

Smith & Wesson Chief Executive Mark Smith laid the blame for the big revenue miss on inventory corrections needed in the sales channel due to a decline in demand for guns late in 2021 and early in 2022.

“The industry experienced our first normal summer slowdown in three years,” he said during the company’s earnings call. “And in addition to the usual seasonal foot traffic decline throughout the period, our channel partners were also selling through existing inventories and therefore we believe manufacturer orders were artificially depressed as compared to retail pull through.”

But he said order rates had rebounded since the end of the quarter, a sign that inventory snags were behind them.

“We continue to expect strong profitability over the remainder of the year aided by our disciplined approach to cost control and promotional spending,” he said in Smith & Wesson’s earnings release.

Three months ago, during the company’s fourth-quarter earnings call, Smith said Smith & Wesson faced higher costs for materials, transportation and labor, but that enthusiasm for shooting sports was still solid. During the call in June, CFO Deana McPherson said “the firearm market has returned to more normalized levels of demand over the past few quarters.”

McPherson said she expected this fiscal year to follow typical historical patterns, with demand picking up in the second quarter due to hunting season and the holiday season in the third. She said she expected the fourth quarter to produce the biggest share of unit volumes.

FBI NICS background checks — a proxy for gun demand — are down so far this year when compared with last year.     

Smith & Wesson shares have declined 24.6% so far this year, as the S&P 500 index
SPX,
+0.75%

has fallen 16.5%. 

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