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Investing

Smith & Wesson (SWHC) Troubled As Crime Falls

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By Douglas A. McIntyre Published

Smith & Wesson (SWHC) shareholders are having an awful day. The stock is off 28% to $7.10 and hit a 52-week low of $6.68. The period high is $22.80.

Part of the reason is that gun inventories are building up. The company said that net product sales for the quarter ended October 31, 2007 were $70.8 million, an increase of 39.4% over the comparable quarter last year. Net income was $2.9 million, or $0.07 per fully diluted share, for the quarter ended October 31, 2007 was $87,000 higher than the comparable quarter last year.

But, the company added some poor news which was that an industry-wide inventory buildup, accentuated by lower retail traffic, caused order activity to slow beginning in October. SWHC added that several manufacturers responded with significant discounts on both long guns and handguns. This caused increased price competition in the channel and served to exacerbate already inflated inventory levels.

It may be tough for the company that crime is down. A look at US crime rates over the last few years shows that most violent crimes are dropping. While the US population rose from 285.3 million in 2001 to 299.4 million last year, violent crimes fell from 1.439 million in 2001 to 1.418 million in 2006.

A drop in criminal activity may be hurting the gun business.

Douglas A. McIntyre

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About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.

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