Retailers take strong stand against guns and e-cigs; stocks remain steady

Two of the biggest controversies in recent times have been with regards to guns and e-cigarettes. Several deaths have been caused by shooting incidents and vaping, causing much uproar among the public and inviting the scrutiny of the law. In this scenario, several retailers decided to take a stand against these issues by amending their policies or banning the sales of these products.

Dick’s Sporting Goods

Following a major shooting tragedy in Connecticut, Dick’s Sporting Goods (NYSE: DKS) stopped the sales of assault-type weapons and raised the age limit for gun purchases to 21 years. In an interview with CBS, Dick’s CEO Edward Stack admitted that the decision cost him about a quarter of a billion dollars in sales. He also said he turned about $5 million worth of rifles inventory into scrap metal.

In its most recent quarterly filing, Dick’s has stated that weak customer demand for firearms and other hunting merchandise has resulted in slower growth. The company believes that changes to its firearms policy has contributed to a continuing decline in its hunt business.

Dick’s is evaluating its strategy for its hunt business, including Field & Stream, and in its most recent quarter, the company removed its hunt category merchandise from around 125 underperforming stores. It remains to be seen how Dick’s overall business is impacted by these matters going forward.

Walmart

Walmart (NYSE: WMT) has taken a stand against guns and e-cigarettes by banning the sale of both products in its stores. The retailer has also restricted people from carrying firearms into its locations. The company had previously stated that these actions are expected to reduce its market share of ammunition from around 20% to a range of approx. 6-9%. While it is not clear how much of an impact the e-cigarette ban will have on Walmart’s performance, it is not likely to cause much of a dent.

Kroger

Like Walmart, Kroger (NYSE: KR) also banned the sale of guns at its Fred Meyer stores and prohibited people from carrying them into its locations. The retailer also stopped the sale of e-cigarettes following the issue of vaping deaths. The exact impact of these decisions are not clear now but like Walmart, Kroger too is less likely to be hugely impacted by these bans.

Also read: PepsiCo: How the snack business steered the company away from rough waters

Others

Walgreens (NYSE: WBA) has prohibited people from carrying guns into its stores and has also stopped selling e-cigarettes. Retailers like CVS (NYSE: CVS), Target (NYSE: TGT) and Costco (NYSE: COST) have also put restrictions on people carrying guns in their stores with Costco agreeing to refund the membership fees of members who disagree with the policy. Rite-Aid Corporation (NYSE: RAD) is another retailer which has stopped the sale of e-cigarettes.

Retailers face a risk from lawsuits that could arise from tragedies occurring in their locations or due to the sale of dangerous products. Considering the amount that they might have to pay in legal settlements, banning such products seems a viable option as the impact to their sales from such bans are likely to be less than potential litigation expenses.  

These actions do not seem to have impacted the stock performance of these companies either. Dick’s shares are up 23% year-to-date while Walmart’s shares have climbed 28%. Kroger’s shares have gained 13% in the past three months.

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