Trump Slump still in effect
Gun Trade World has reported on the notion of the ‘Trump Slump’ several times over the past few years and it appears that the effects are still disturbing the gun industry.
It was expected that Hillary Clinton would win the 2016 presidential election and this caused many companies to buy in more stock, confident of increased sales.
A Clinton presidency would have consumers panic buying under the cloud of potentially losing their second Amendment rights.
However, when Donald Trump won, these 2A fears were quashed and a ‘Trump Slump’ was activated. Sales slowed and some companies have even gone out of business after taking a gamble that didn’t pay off.
The latest victim to the slump is firearms distributor United Sporting, the parent company of Ellett Brothers, which recently filed for Chapter 11 protection in the U.S. Bankruptcy Court for the District of Delaware.
USC CEO Brad Johnson’s bankruptcy filing report tells us that the battle for the White house was the major reason for his company’s demise.
“In the lead-up to the 2016 presidential election, the Debtors [USC] anticipated an uptick in firearms sales historically attributable to the election of a Democratic presidential nominee. The Debtors increased their inventory to account for anticipated sales increases. In the aftermath of the unexpected Republican victory, the Debtors realized lower than expected sales figures for the 2017 and 2018 fiscal years, with higher than expected carrying costs due to the Debtors’ increased inventory. These factors contributed to the Debtors tightening liquidity and an industry-wide glut of inventory.”
The bankruptcy filing tells us that USC’s 2018 net sales were around the $557 million mark, up from $531.1 million in net sales for 2017 but well below USC’s average of $885.3 million in net sales from 2012 through 2016.
The company’s five largest creditors are Vista Outdoor Inc. (unsecured claim of $3.3 million), Sturm Ruger & Co. ($3.2 million), Magpul Industries Inc. ($2.1 million), Savage Arms Rifles ($1.9 million) and Bushnell Corp. ($1.9 million). Other notable creditors include Smith & Wesson ($1.4 million), Garmin USA Inc. ($1.2 million) and Remington Arms Co. ($0.9 million).
The bankruptcy filing tells us, that USC employs approximately 321 full-time, part-time and temporary employees. The company possesses a sales office, distribution centres whilst also leasing an office and distribution facility in Pennsylvania, a distribution facility in Salt Lake City, UT, and additional sales offices in Pennsylvania, California, Minnesota and Texas.
This is just the latest in a fairly long line of trump slump casualties which includes Remington Outdoor who filed for Chapter 11 protection to restructure $700 million in debt.
The company materialised from bankruptcy in the Spring of 2018 but has been working feverishly to stabilise its commercial operations. It is reported that the company may partially close its plant in Ilion, NY where 500 workers are currently on the payroll.
It’s not just manufacturers that are being affected by the Trump Slump. Retailers are also changing their policies to either not sell guns at all or limit what is being sold. This is not entirely down to the Slump but events including mass shootings have put pressure on retailers.
Dick’s Sporting Goods announced last year it would stop selling assault-style weapons and high-capacity magazines following a tragedy in Parkland, Florida.
The company also stopped selling guns to anyone younger than 21. “It is clear we have a problem with the gun laws in this country. They are not squarely focused on keeping all of us safe—especially our children,” said Dick’s CEO, Ed Stack.
As a whole the stats coming out of The National Shooting Sports Foundation projected firearms sales at 13.1 million, down 6.1 percent from 14 million in 2017 and down 16.5 percent from record sales of 15.7 million in 2016.
“At the peaks in 2013 and 2016, we reached 13 million to 14 million domestic builds and 5 million to 7 million imports of guns, which now are probably down 30 percent to 40 percent, fluctuating,” Brian Rafn of Morgan-Dempsey Capital Management LLC told SGB Media.
Brighter times ahead
However, things change quickly in the gun industry and with a presidential race quakily approaching and other retailers upping their stocks as their competitors fail sales are expected to grow.
Possibilby the first green shoots of recovery can be seen from the fourth-quarter earnings report for American Outdoor Brands.
Peerformance was above expectation. Net sales were $175.7 million, compared with $172 million in last year's fourth quarter, up 2.2 per cent and ahead of management's forecast of $162 million to $172 million. GAAP earnings were $9.8 million, or $0.18 per share, versus $7.7 million, or $0.14, a year ago, far exceeding the $0.03 to $0.07 range management had guided toward. On an adjusted basis, earnings were $0.26 per share, versus $0.24 per share last year; that exceeded the expected $0.11 to $0.15 range.