The unexpected results of the presidential election delivered good news and bad news for the gun industry.
In the months leading up to the November election, it seems gun owners clearly thought Hillary Clinton would win. As a result, they were driving up sales of firearms, a common occurrence when they believe there is an increased risk of anti-gun legislation.
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But with the victory of Donald Trump, apparently gun owners’ minds were put as ease. As a result, firearm sales have dropped sharply.
In a recent 8-K, Sturm Ruger & Company Inc. (RGR) included a transcript of its earnings call on Feb. 23. Chris Killoy, Sturm’s president and CEO, said the year had been going great until November. Revenues for 2016 were $664.3 million, up from $551.1 million in 2015. Across the country, the number of background checks performed by the National Incident Criminal Background Check System, jumped 10% for 2016.
But…Killoy said in December, NICS checks dropped 17% from the previous year. In January, they dropped 24%. Overall, the last quarter was still decent because there had been a frenzy of gun buying just before the November election.
“As we discussed in our last call on November 2, just prior to the election, we observed many customers spending discretionary income on concealed carry products and modern sporting rifles in the weeks and months leading up to the election,” he said.
But drops in NICS checks were a sign that “consumer demand for certain firearms has softened since last year.”
That could be bad news for many gun retailers as well. Killoy said many of them also had been stocking up their inventories in anticipation of a Clinton victory. That will compound Sturm’s problems because there are so many unsold guns sitting around store shelves.
“We also observed retailers committing inventory dollars to certain product categories, such as modern sporting rifles, which likely would’ve been in stronger demand if the election had turned out differently, given their relative vulnerability to legislative actions,” Killoy said. “The combination of increased inventory in the channel and a likely decrease in consumer demand for the near term has made for a more challenging sell-through environment.”
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