The intense political rhetoric around gun control may have unintentionally boosted gun sales further.
On Thursday, gunmaker Smith & Wesson (SWHC) reported 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, Colo.
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, Conn., 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.
