The intense political rhetoric around gun control may have unintentionally boosted gun sales further.
On Thursday, gunmaker Smith & Wesson (SWHC)
reported a huge quarterly numbers. Third quarter revenues rose 61%
year-over-year to $211 million, boosted by a 25.3% jump in handgun
sales. Earnings per share of $0.59 beat estimates by $0.18, and the
company is even more optimistic about the future, issuing strong
guidance for next quarter.
The
FBI’s National Instant Criminal Background Check System (NICS), which
is a proxy for demand, surged by more than 25% over the last year,
“validating our belief in the long-term growth prospects for the
firearms market,” CEO James Debney said.
“We
believe overall market growth in firearms is a combination of the
long-term trend toward personal protection as well as the shorter term
influences of a very strong holiday shopping season, the potential
impact of news events, and the current political environment," he said.
The
matter of the “current political environment” is counterintuitive,
especially under a Democratic administration. Contrary to common sense,
data shows that Democratic presidents have been very good to the gun
industry, at least in the short run, according to Wedbush securities.
Why?
The National Rifle Association has seized on regulatory comments that
prey on gun advocates’ fear of governmental confiscation of guns. Yet,
still, the likelihood of any actual gun legislation is exceedingly low,
Wedbush analysts argue.
The
largest month of growth for firearm background checks was January 2013,
which saw an increase of more than 90 percent, according to Wedbush.
This demand surge was prompted initially by the re-election of President
Barack Obama, who had made tighter gun control legislation a part of
his platform during the 2012 campaign and in the aftermath of the July
2012 shooting in Aurora, CO.
In
the company’s latest annual filing, the gunmaker said, “We experienced
strong consumer demand for our firearm products following a new
administration taking office in Washington, D.C. in 2009. In addition,
speculation surrounding increased gun control at the federal, state, and
local level and heightened fears of terrorism and crime can affect
consumer demand for our products. Often, such concerns result in an
increase in near-term consumer demand and subsequent softening of demand
when such concerns subside.”
Event-driven sales
Gun
tragedies have also been associated with spikes in background checks.
The Newtown, CT tragedy a month after the November 2012 election further
prompted an effort to ban assault rifles and high-capacity magazine
pistols. These events caused a flood into stores, but no ban
materialized given lack of support in Congress.
While
the company didn’t specifically call out San Bernadino shooting in its
conference call, it cited the influence of “potential impact of news
events” as boosting sales.
Since
1980, the number of guns in possession in the United States has
essentially doubled to 350 million, according to the Bureau of Alcohol,
Tobacco, Firearms and Explosives. Yahoo Finance took a look
at the impact of the San Bernadino shooting in December and the outlook
for growth of handguns and long guns (which includes shotguns and
rifles) which totaled $4 billion in 2014.
By: Nicole Sinclair.
Photo: John Locher (AP).
Review:
Emerging Market Formulations & Research Unit, Flagship Records.
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