Smith & Wesson Maker Plunges on Weak Outlook for Gun Sales

(Bloomberg) -- American Outdoor Brands Corp., the maker of Smith & Wesson guns, plunged after warning of a lengthy sales slump.

Consumer demand for firearms is falling to “new, lower levels” that “may continue for some time,” the company said in a statement Thursday as it reported earnings. American Outdoor said it's cutting costs and repaying debt to weather the downturn.

“We will operate our business under the assumption that the next 12-18 months could deliver flattish revenues in firearms,” Chief Executive Officer James Debney said in the statement. The company said it pared its manufacturing workforce by 25 percent in the last year.

The diminished outlook underscored the drop in firearms sales since President Donald Trump won election in November 2016, easing a rush among gun buyers to stockpile weapons ahead of potential new federal restrictions. Gunmaker stocks have also tumbled since the Feb. 14 shooting of 17 people at a Florida high school. American Outdoor made the semiautomatic AR-15 assault-style rifle used in the attack.

American Outdoor tumbled 14 percent to $8.05 in late trading in New York. The shares fell 27 percent this year through the close on Thursday. That followed a 39 percent drop last year.

Gloomy Forecast

Firearm background checks compiled by the Federal Bureau of Investigation, a proxy for gun sales, fell 8.4 percent last year after increasing in 13 out of the last 14 years. The checks in January were the lowest in six years on an adjusted basis, Debney said.

American Outdoor forecast earnings of 31 cents to 33 cents a share for the current fiscal year, trailing the lowest of six analyst estimates compiled by Bloomberg. Wall Street had been expecting 60 cents a share.

The company lowered its sales target for the fiscal year ending April 30 to a midpoint of $599 million from a December projection of $662.5 million. Analysts had predicted $655.6 million.

American Outdoor, preparing for an extended slowdown, has repaid $75 million in recent months and extended the due date on $75 million of notes to August 2020. The company said it shared the nation's grief over the Florida attack.

To contact the reporter on this story: Thomas Black in Dallas at tblack@bloomberg.net.

To contact the editors responsible for this story: Brendan Case at bcase4@bloomberg.net, Susan Warren

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