Cooler gun sales have the discounts heating up

A spate of mass shootings in recent weeks has rekindled the longstanding, and agonizing, debate over how to regulate them. For many gun owners, by contrast, the most pressing question as the holiday season nears may be this: Where can I get the best deal on a piece?

That’s because US firearms makers have been ratcheting up their promotions of late to clear out an inventory glut. That supply buildup came after fears that the Obama administration would push stricter gun-control regulations proved groundless.

According to Larry Hyatt, the owner of the Hyatt Gun Shop in Charlotte, North Carolina, demand for firearms has softened from the record highs it had hit previously when the industry ramped up production and new gun stores and ranges opened.

“We had the highest volume of sales by far during the last four years of the Obama administration,” said Hyatt, whose store is the nation’s largest. “When you have that big a peak, you can expect a pretty big trough sometime afterward.”

Background checks conducted through the FBI’s National Instant Criminal Background Check System, which Wall Street analysts consider to be a good proxy for gun sales, slumped 17 percent in October. That continued a string of double-digit declines in recent months.

The retail gun market is in the midst of upheaval. Earlier this year, Bass Pro Shops agreed to acquire Cabela’s, a leading retailer of guns and other hunting gear, for $5 billion. Rival Gander Mountain shut its doors, while Dick’s Sporting Goods (DKS) has long complained of soft sales in its hunting business. 

Those retailers’ woes have motivated gunmakers to reach out to consumers directly.

American Outdoors Brands’ (AOBC) Smith & Wesson, which was founded eight years before the Civil War, is offering a $50 gift card with any purchase of a new revolver or M&P Bodyguard 380 pistol. Rival Remington Outdoor is offering $100 off any handguns bought by Nov. 18 in a “pre-Black Friday Savings Event” in addition to $40 to $75 cash-back offers on select rifles. Remington’s brands include semi-automatic weapons such as Bushmaster, Panther Arms and TAPCO. Its roots date back to 1816.

Speaking to Wall Street analysts earlier this month, Sturm Ruger (RGR) Chief Executive Christopher Kilroy said the maker of Ruger weapons offered more promotions in its latest quarter that were “moderately more aggressive than last years.” 

The Southport, Connecticut-based company, however, said it took a disciplined approach to its marketing and didn’t extend payment terms for customers financing purchases of its weapons even though its rivals did.

“We will continue to take a measured and thoughtful approach to sales promotions and rebate opportunities considering both the short-term benefits and the potential long-term implications, both financial and reputational,” Kilroy said.

A Sturm Ruger spokesperson couldn’t immediately be reached.

American Outdoor CEO P. James Debney told Wall Street analysts in September he was surprised that the existing promotions weren’t more effective in reducing inventory.

“You have some very rich promotions coming through from many manufacturers, ourselves included, and what that forces the retailer to do, they just really sometimes buy more inventories to support those promotions. They don’t have that inventory already in stock that that promotion is targeting,” he said.

A spokeswoman for American Outdoor declined to comment on any future promotional plans.

In a recent filing with the Securities and Exchange Commission, Remington Outdoor noted that “competitive promotions are contributing to lower levels of product profitability.” Remington didn’t respond to a request for comment.

During the three-month period ending Oct. 31, the Madison, North Carolina-based company reported a loss of $16 million on revenue of $154.1 million.

Shares of Sturm Ruger have slumped 7 percent since the start of the year, while American Outdoor Brands shares have plunged 37 percent. They both traded up on Wednesday, 0.6 percent and 1.7 percent, respectively, closing at $48.75 and $13.34.

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