The headlines say it all…
Gun Demand Slows in America — December 11, 2013: “Americans appear to be buying fewer guns in recent months, compared with earlier this year, when firearms sales seemed to be exploding… Remington Outdoor says 2013 sales will grow between 34% and 37% year over year (down from 51% from 2013’s first nine months), while Smith & Wesson announced a 2% sales improvement and a 20% drop in earnings during its most recent quarter. In November, federal background checks slipped by 10% during its most recent quarter.” (Christopher Freeburn, money.msn.com)
Cabela’s Hit by Slowing Gun Sales — February 13, 2014: “Cabela’s cited a slide in sales of guns and ammunition when it reported Thursday a 10% decline in fourth-quarter sales… ‘The surge in firearms and ammunition is clearly winding down,’ Chief Executive Thomas Millner said, referring to the earlier sales run-up as a ‘bubble.’ The retailer said it expects the sales weakness to continue in the coming quarter: Through the first six weeks of 2014, sales of firearms and ammunition were down about 50% from a year earlier, when those sales doubled.” (Shelly Banjo, the Wall Street Journal)
US Gun Sales are Slowing Down, Here’s Why — February 17, 2014: “New data from the FBI shows that gun sales in the U.S. have dropped significantly compared to last year. The number of U.S. gun sales appears to be taking a downward turn, according to a new report from CNNMoney. The report looked at FBI’s January records for federal background checks, one of the most accurate ways to measure gun sales. For the month of January, the FBI reported 1.6 million federal background checks, which is nearly half of the 2.5 million checks conducted the same time last year.” (Matt Alpert, www.wideopenspaces.com)
Guns and Ammunition Stores in the US Industry Market Report – February 12, 2014: “The (Gun and Ammunition Stores) industry’s recent rapid growth is expected to slow over the next five years, increasing at a more normalized average annual rate.” (prweb.com)
US Firearms and Ammunition Market: Trends & Opportunities (2013-2018) — December 18, 2013: “Firearms and ammunition makers of the United States has [sic] benefited from conflicts abroad and domestic fears about rising crime rates. While continued conflict will support revenue growth in the near future, demand for the industry’s products will slow down in the light of diminishing concerns. In the United States, majority of citizens owns a gun as the denial rate in background checks for the licensing of guns is very low, which is the main reason for growth of firearm industry in the country.” (reuters.com)
To say that the firearms industry today is very different than it was even a decade ago would be an understatement of mammoth proportions. A casual glance at federal NICS data shows that, although there was modest growth in the first part of the new millennium, the real surge in recent years began in 2010, early in President Obama’s first administration.
Then, of course, two seminal events in 2012 caused the odoriferous substance to impact the spinning blades: Obama’s reelection to a second term, and the terrible shooting tragedy in Newtown, Connecticut.
“Advocates of gun control have found a new flag under which to rally, after the terribly tragic events in Newtown, Connecticut,” wrote the New Jersey Federated Sportsmen News soon after that shooting occurred. “Time will tell if this will provide a ‘tipping point’ for Great Britain-like overreactions, which not the 2007 Virginia Tech shootings, nor the 2009 Fort Hood shootings, nor the 2012 Aurora shootings could.”
Although America did manage to avoid an overreaction as extreme as that (with the unfortunate exceptions of a few states like New York, Colorado, and Connecticut), the beehive of anti-gun sentiment and rhetoric triggered a volume of firearms sales unlike any ever seen in this country.
But, as Millner pointed out in the Wall Street Journal, such activity necessarily had to be a bubble, and naturally no bubble can last, much less keep expanding, forever. The political fervor pushing much of this phenomenon has quieted down, and — at least until some political tsunami hits the country again — this relative calm will undoubtedly keep sales activity closer to normal.
Another factor contributing to what Warren G. Harding might have called a “return to normalcy” is simply dollars and cents. “I believe that much of this recent slowdown is simply financial,” observes Patrick Shea, Director of Retail Development for the National Shooting Sports Foundation. “We kind of bought everything we can buy. There’s a limit to the fiscal inventory.”
Yet most observers in the industry see this as a good-news-bad-news kind of scenario, especially in light of the general perception that, despite the bubble shrinkage, the current firearms industry is in overall good health.
“Of course sales are down, that’s not a secret at all,” remarks Scott Hoffman at Hoffman Guns, located in Newington, Connecticut. “After the surge we saw as a result of the election and tragedies, it had to slow down again. It was foolish to think that it could stay at those levels forever.”
It’s still better than before the 2012 boom, although every state is different,” he added. “Here in Connecticut, military-style rifles have been banned, but our business is actually better now than before.”
Some retail segments are nevertheless seeing some increases, despite the overall slowdown. Larry Hyatt of Hyatt Guns in Charlotte, North Carolina, tells us that some of his sales have actually seen an upturn in recent months.
“We actually have seen an increase in sales of shotguns, especially over-unders. But handgun and tactical firearms are both dropping about 20-25%,” he admits. “It was a huge bubble that we experienced.”
Similarly, in November of 2013, some companies were still posting gains, with Ruger announcing that its third-quarter earnings showed an increase over the previous year by 64%, led by a sales improvement of 45%.
All this underscores remarks made recently by Lawrence Keene, the General Counsel at the NSSF, who told CNNMoney, “So we have come down from the peak but the valley floor is higher than before November, 2012. The consumer base has grown. This is because for the past few years, retailers tell us that about 25% of customers at the checkout counter are first-time buyers, including huge increases in the number of women buyers.”
“In March of 2014, firearms sales were down 18.4 % over the previous year,” added Bill Brassard, the NSSF’s Communications Director. “But they haven’t gone back to where they were historically — there’s a new and higher floor. There’s no question that the surge we saw could not be sustained.”
Some of the fallout from the recent sales downturn includes a number of new or expanded shooting and/or retail facilities, and this has some in the business concerned.
“At the same time that the market is going down, there are huge numbers of ranges and stores that are opening or expanding,” Hyatt says. By the time they are ready for business, he points out, the market is likely going to be much smaller.
“There are way too many outlets opening up. It could leave us with store closures, bankruptcies, and more,” he adds.
Miles Hall of Oklahoma City-based H&H Shooting Sports echoes these worries.
“I’m concerned for those new places that are opening,” he says. “How are they going to pay for it?” He described a related problem, that of individuals who hired themselves out as so-called “experts” in locating and designing firearms stores and ranges — charging exorbitant (“as high as six figures”) prices for this service.
“They’re taking their clients down a very bad path,” Hall said. “Apparently they’ve been promising a 20-25% annual return on investment, and that’s bull [crap]. What’s also bad is when the clients lose their investment, they could end up blaming the gun industry for their misfortune.”
Another casualty of the shrinkage is product and inventory.
“There’s a glut of guns on the market,” Hoffman says, adding “and many retailers have a lot in inventory.”
Hyatt is seeing the same thing.
“There’s been lots of inventory buildup,” he agrees, “and it’s tying up capital. For many retailers, cash on hand is lower than they like, and back orders are still coming in — we’ve been canceling some of them. Some of this surplus may be absorbed by the new large stores that are still opening — like Bass Pro Shops and Gander Mountain — but I don’t see the current demand being high enough for this kind of expansion.”
Stay Out of The Niche
How can retailers best respond to this “new normal” (as many are describing it)? Based on our conversations with various sources, the answers fall into two general categories.
The first includes retailers who are already well established and have made a go of the business for some years, and the other speaks to those who either jumped in recently, or switched their store over, to ride the big wave of modern sporting rifle sales.
Speaking of the latter, Hoffman suggests that any such “niche” dealerships look to find another niche that can work, suggesting that the appropriate subcategory depends on a particular retailer’s local market and his or her location. He points out that in Connecticut, there were a number of stores that had a “lopsided amount of business” based on firearms styles that they can’t sell anymore.
“I lost that activity as well, but it was less of a problem for us,” he said, pointing out that they’re set up to sell to a large variety of markets in the shooting sports, as a “mainstream” firearms dealer.
“It’s too hard to suddenly go mainstream; it takes time and money,” Hoffman contends.
(The hard truth for some of these “niche” shops is that they were unable to weather the business slowdown, and were forced out. In some people’s eyes, that may be just as well, as it leaves the landscape more similar to that of the pre-2012 days, and business can resume to something approaching normal.)
In the other category, a number of sources essentially say the same thing as one another: Continue doing what you’ve been doing for years in order to stay as an ongoing and profitable enterprise. In other words, remember the basics of good service.
“It’s important now to focus on good customer service,” says Shea. “That may sound hackneyed, but it’s important to use anything you can to be different from your competition and to provide what the customer needs. That could be bringing a gunsmith on site, offering creative sales packages, having a ladies’ night. … In other words, stick with standard competitive practices. These days you can’t expect people to just walk in.”
Another response is one that’s kept many firearms retailers in business for many years: firearms accessories. Margins on firearms have been low for a long time, and accessories continue to be important to all gun owners — including the bumper crop of new shooters.
“People are continuing to purchase things like range time and ammo,” says Hyatt, “and reloading has seen a tremendous surge in interest. Gun care areas, like cleaning products and storage units (safes, vaults) are also big, as are extra magazines for a variety of firearm styles.”
“AR accessories are always good,” Brassard suggests. “There are so many of them, and we’re hearing that there’s continued interest in these across the board. Owners definitely like to accessorize their MSRs a lot. And women-related items continue to be hot; 78% of retailers report an increase in sales of these — things like holsters, grips, and apparel.”
Hoffman agrees with the importance of accessories, but pointed out that each dealer has to decide for him- or herself just how to approach those.
“Accessories tend to suit the style of guns being sold,” he said. “The accessories trend therefore kind of piggybacks with which firearms are selling, and that’s largely a regional phenomenon.”
One area of accessories that we’ve purposely avoided discussing so far is the one that continues to weigh on people’s minds, and that of course is ammunition.
“The single biggest issue in the midst of this is the lack of ammo,” Hall told us. “Especially in .22; that by itself has killed our .22 market.”
Hall explained that ammunition shortages are something that will not sit well with many who are new in the shooting sports. He related one anecdote in which he was chatting with a couple of his younger customers, and they expressed a lack of understanding on the difficulty with obtaining ammo.
Their view was essentially: “If Apple comes out with a new cell phone, I don’t have to be at the store right away to be able to buy one; if I come a month later I’ll still be able to pick one up.”
Although we might rightfully argue with that comparison, it nevertheless reveals their mindset. Hall expressed the concern that if the industry cannot continue to provide this new blood with the supplies they need to enjoy their new pastime, they will simply drift away to pursue other activities.
What kind of a future might we expect in gun sales over the next year or more? Perhaps the most important consideration is the ever-changing political environment. But most sources agree that in the absence of any game-changing or catastrophic events, the firearm business looks to be one of continued good health.
“Things should settle down to the steady growth we’ve seen from 2010, which is probably our new baseline,” offered Shea. “There are lots of new shooters, especially women, and people are showing renewed interest.”
“The industry is bigger than it was, so of course that’s good,” said Hyatt. “But it’s tough to plan — things could happen this afternoon that would change everything. Politics is the biggest influence for our business, and that makes me uncomfortable.”
“It’s hard to predict the future,” agrees Hoffman. “If there are no big events, then the rest of this year, and the next couple, will probably be like 2011 and 2012. But gun sales are always driven by events, and the political threats that may follow. On the other hand, years ago we didn’t really have any new shooters, and today there are many new shooters.”
“The firearms industry will continue at a strong pace,” added Brassard, “both in firearms and accessory sales. Every measure shows that there is more interest in the shooting sports, in hunting, in self-protection — all of it, really. We won’t see any major slowdowns.”