Gun and ammo sellers are suffering from a lack of ‘fear-based buying’ because no one’s worried about gun control under Donald Trump

AP Photo/John Locher

Some of America’s biggest sellers of guns and ammo are suffering from a lack of "fear-based buying," as consumers aren’t worried about stricter gun control while Donald Trump is in office.
Ammo sales have been hit by consumers buying fewer bullets because they stockpiled during past scares.
"All of the best minds predicted that the recovery would take 18 to 24 months, and here we are at well over 2 years without the market rebounding," said one executive.
Watch American Outdoor Brands, Sturm, Ruger, Olin, and Vista Outdoor trade live.

Some of America’s biggest sellers of guns and ammo are suffering from a lack of "fear-based buying," as consumers aren’t worried about stricter gun control while Donald Trump is in office.

Given the minimal risk of Democrats passing tighter gun laws while Republicans control the Senate and the White House, people haven’t been panic-purchasing firearms out of paranoia they’ll lose access to them.

Somewhat ironically, open season for gun buyers has hammered the firearms industry: the number of background checks for handgun buyers recorded in the National Instant Criminal Background Check System — a useful proxy for consumer demand for firearms — fell 6% last year and dropped 8% in the first quarter of this year.

"There’s an absence of fear-based buying…based on fear of regulation," said American Outdoor Brands’ CEO James Debney on the company’s fourth-quarter earnings call this week. "We don’t see any of that right now."

American Outdoor, which owns Smith & Wesson, sold nearly 700,000 fewer handguns and long guns in the year to April 2018, compared to the previous fiscal year when consumers feared Hillary Clinton would be elected president. The company’s handgun revenues plunged by more than $230 million or 41% in the year to April 2018, and its sales of long guns halved to about $90 million, as fears of more stringent gun control evaporated.

"Certainly the market appears to have somewhat reached its low point," Debney told analysts this week. "Is it going to start growing from here? I just don’t know."

Next year’s presidential election could fuel another firearms boom. Asked on the earnings call whether retailers are stocking up in anticipation of a buying frenzy once conservative rhetoric around gun control ramps up again, Debney said he’s seen no evidence of that. However, he pointed out the last spike in sales occurred four or five months before voting day.

"We’re still a year before that buildup period started in the equivalent time in the last election," he said. "So we’ve got a long ways to go, and we’ll see."

Other firearms merchants have struggled too. Net sales slumped 13% and earnings per share dropped 9% at Sturm, Ruger & Co. in the first quarter of 2019 due to a "a decline in overall market demand," and the seller of Ruger revolvers and rifles reported similar trends last year. Even a Democratic takeover of the House failed to galvanize sales.

"We thought there might be an uptick in demand following the midterm elections, that largely did not occur," said CFO Thomas Dineen on the company’s fourth-quarter earnings call in February.

Ammo sellers have faced a similar issue: consumers who stocked up on bullets during past gun-control scares aren’t buying new rounds at their normal rates. Olin, which makes Winchester bullets, suffered a 10% drop in commercial sales last year and an 8% drop in the first quarter of this year.

"We believe the individual consumer inventory levels remain elevated, which could pressure commercial demand in the near to intermediate term," said CEO John Fischer on the first-quarter earnings call in May.

Ammunition purchases in North America were 30% to 40% lower between the end of 2016 and the end of 2018 than in almost seven years, Fischer said last year. In February, he estimated it could be "another year to 1.5 years" before consumers deplete their inventories enough to boost demand to its historical norm of 11 to 12 million rounds per year.

Vista Outdoor, which sells Federal Premium ammunition, has also been hit by bullet stockpiling.

"While the ammo market seems to be bottoming out, we still aren’t seeing that upward J curve that we’d like to see," said CEO Christopher Metz on the fourth-quarter earnings call in May. "All of the best minds predicted that the recovery would take 18 to 24 months, and here we are at well over 2 years without the market rebounding."

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Source: Business Insider – tmohamed@businessinsider.com (Theron Mohamed)