Americans' affinity for guns and ammunitions — especially among those anxious about a perceived diminishment of ownership rights — was on display this week as Smith & Wesson Holdings reported record sales and profits.
Walmart sells what are known as long guns, essentially shotguns and rifles, at many of its stores along with various types of ammunition that it and other retailers have been forced to place quotas on due to rampant demand. Walmart doesn’t disclose sales for its sporting goods department, but it surely is benefitting from the same consumption patterns evident at other retailers. For example, Cabela’s reported a firearms and ammunition driven 24% same store sales increase during its quarter ended March 30. If those guns and ammo are excluded the comp rose 9%.
While that is a healthy increase, it was Smith & Wesson’s report for the fourth quarter period ended April 30 that was truly stunning. The firearms manufacturing said sales grew 37.6% to $178.7 million and despite a more than 40% annual increase in manufacturing capacity it was unable to keep pace with demand.
"We are pleased with our results, which include record fourth quarter and annual net sales and profits and a substantial expansion of our gross margins," said James Debney, Smith & Wesson’s president and CEO. "Our successful performance was driven by solid marketing, innovative new products, disciplined manufacturing execution, and strict financial management."
In addition to the sale growth, income from continuing operations increased 60.6% to $28.6 million, or 44 cents a share, from $17.8 million, or 27 cents a share. The strong product demand coupled with expense control proved to be a potent combination that allowed the company to expanded gross margins to 38.3% of sales from 36.1% of sales and reduce operating expenses to 12.1% of sales from 16.3% of sales. As the gross margin and expense rates headed in opposite directions, Smith & Wesson’s operating margin expanded to 26.2% in the fourth quarter compared to 19.8% the prior year.
For the full year, the company’s sales increased 42.6% to a record $587.5 million and firearm production capacity increase by 40.4%. Income from continuing operations was $81.4 million, or $1.22 a share, compared to $26.4 million or 40 cents a share the prior year. Full year gross margins expanded to 37.2% from 31.1% and operating expenses declined to 14.6% of net sales compared to 20.2%.