Sturm, Ruger & Co. (RGR), the largest publicly traded U.S. firearms maker, reported third-quarter profit that missed analysts’ estimates as demand for guns wanes while retail inventories remain high.
Net income fell 76 percent to $6.78 million, or 34 cents a diluted share, from $28.7 million, or $1.44 a year earlier, the Southport, Connecticut-based company said in a statement. Analysts had estimated 94 cents, the average of three estimates compiled by Bloomberg. Sales dropped 42 percent to $98.3 million missing the average estimate of $143 million.
Gun enthusiasts had flocked to stores after 2012 shootings at an elementary school in Newtown, Connecticut, and at a movie theater in Aurora, Colorado, with buyers stocking up amid fears that restrictive legislation would soon follow. Increased demand made last year “the high water mark in the company’s history,” Chief Executive Officer Michael Fifer said in July.
That sentiment has faded, leaving the market awash in oversupply. Sturm Ruger said earnings were also affected by a “lack of significant new product introductions from the company.”
Decreased sales this year are a correction from the 2013 spike, said Andrea James, a senior research analyst at Dougherty& Co.
“The tragedy of Newtown and the subsequent call for the renewal of the modern sporting rifle ban drove yet another spike, and this was a big spike,” she said before the results were released. Political gridlock put gun control on the back burner this year, ending the rush to stock up on firearms.
The shares fell 7.7 percent to $43.50 at 5:39 p.m. after the close of regular trading in New York. The stock fell 36 percent this year through the end of regular trading today. Smith & Wesson Holding Corp. (SWHC), the second largest publicly traded U.S. firearm company, dropped 21 percent.
Criminal background check requests for gun purchases, a gauge of interest in firearms, averaged 1.75 million a month in 2014 through July, down 3.8 percent from a year earlier, according to U.S. Federal Bureau of Investigation Data.
“2014 has been a bad year versus ’13, but it’s going to be the second-biggest year in history for gun sales,” Brian Ruttenbur, an analyst at Stamford, Connecticut-based CRT Capital Group LLC, said.
