Consumer Products

Shares of Parent of Smith & Wesson Assault Rifle Maker Crash

Douglas A. McIntyre

The stock of the parent company of rifle maker Smith & Wesson has collapsed over the past year. American Outdoor Brands Corp. (NASDAQ: AOBC) gun division made the semi-automatic AR-15 assault rifle used in the Parkland, Florida, school shooting.

American Outdoor Brands shares were last seen trading at $10.90 apiece, which is down 44% over the past year. The S&P 500 index is up 24% in that time. The company has offered lackluster guidance. Worries about increased firearm buyer background checks also have hurt the shares.

Results for the quarter that ended October 31 were terrible:

Quarterly net sales were $148.4 million, in-line with the company’s guidance range, compared with $233.5 million for the second quarter last year, a decrease of 36.4%.

Gross margin for the quarter was 34.2% compared with 41.8% for the second quarter last year.

Quarterly GAAP net income was $3.2 million, or $0.06 per diluted share, compared with net income of $32.5 million, or $0.57 per diluted share, for the comparable quarter last year.

James Debney, American Outdoor Brands president and chief executive officer, gave specific reasons:

Our results for the second quarter were within our guidance range despite challenging market conditions. Lower shipments in our Firearms business reflected a significant reduction in wholesaler and retailer orders versus the prior year, and were partially offset by higher revenue in our Outdoor Products & Accessories business. Total revenue for the quarter faced a challenging comparison to last year, when we believe strong consumer demand was driven by personal safety concerns and pre-election fears of increased firearm legislation.

A lack of gun control laws actually may undermine sales going forward as people do not need to rush to buy new weapons.

One notable thing about the American Outdoor Brands earnings is that legal gun sales are not a massive business. The company has a revenue run rate, based on the most recent quarter, of less than $700 million. Maybe gun owners are getting their guns somewhere else.