Categories Analysis, Industrials

The road ahead looks bumpy for gun stocks

Walmart (NYSE: WMT) recently decided to stop the sales of handguns and certain kinds of ammunition in the wake of a number of shooting tragedies. This move will reduce the company’s market share of ammunition from around 20% to a range of approx. 6-9%. Several other retailers, including Kroger (NYSE: KR), have joined Walmart and amended their gun policies.

The rise in mass shooting incidents have brought the topic of gun control to the fore and increased calls for changes to gun policies. This has put the spotlight on gun companies and it appears that gun stock investors have reasons to be concerned.

Looking at the past five quarters, American Outdoor Brands Corporation (NASDAQ: AOBC) saw sales increases in all four quarters of 2019 but this sales growth started to decelerate from the third quarter. In the first quarter of 2020, the company reported a double-digit decline in sales, reflecting the softness in the firearms market.

For fiscal year 2020, American Outdoor’s revenue is estimated to dip to $636 million from $638 million in the previous year. The stock has dropped 51% year-to-date and 57% in the trailing 52 weeks.

American Outdoor Brands versus Vista Outdoor quarterly sales trend

Another player is Vista Outdoor (NYSE: VSTO) which used to be a leader in the firearms space. Over the past five quarters, however, the company has seen continued declines in sales, with double-digit decreases from the third quarter onwards.

As part of its transformation plan, Vista sold its Savage Arms and Stevens firearms brands for $170 million in July. The company had previously stated that the sale had no connection to the protests and the decision was taken so that Vista could focus on product categories with growth potential.

Also see: Walmart Q2 2020 Earnings Report

Vista lowered its sales guidance for fiscal 2020 to a range of $1.79 billion to $1.89 billion from the prior range of $1.94 billion to $2.03 billion, to reflect the sale of Savage Arms. Vista’s shares have plunged 53% so far this year and over 70% in the past 12 months.

According to a report by Shooting Industry, the firearms industry has been facing challenges since 2016. With the 2020 election nearing, firearms sales are likely to take further hits going forward.

Listen to on-demand earnings calls and hear how management responds to analysts’ questions

Most Popular

IPO Alert: What to look for when Boundless Bio goes public

Boundless Bio is preparing to debut on the Nasdaq stock market this week, and become the latest addition to the list of biotech firms that have launched IPOs this year.

Nike (NKE) bets on innovation and partnerships to return to high growth

Sneaker giant Nike, Inc. (NYSE: NKE) has been going through a rough patch for some time, with sales coming under pressure from weak demand and rising competition. Post-pandemic, the company

Walgreens Boots Alliance set to report earnings next week. Here’s what to expect

Walgreens Boots Alliance, Inc. (NASDAQ: WBA), the drug store chain that is expanding into a diversified healthcare provider, is on a restructuring drive aimed at better aligning the business with

Add Comment
Loading...
Cancel
Viewing Highlight
Loading...
Highlight
Close
Top