Firing on all chambers, Smith & Wesson sales surge

American’s demand for guns outstripped supply during the fourth quarter at Smith & Wesson Holdings, where ramped-up production produced a 37.6% sales increase.

The dramatic sales growth comes amid ongoing concerns among some consumers of impending restrictions on gun ownership and runs on ammunitions that prompted some retailers to impose daily quantity limits. Surging demand for firearms caused outdoor specialty retailer Cabela’s to report a 24% same-store sales increase for the quarterly period ended March 30. Comps increase 9% if guns and ammunition are excluded.

Smith & Wesson said sales for its fourth quarter ended April 30 increased 37.6% to $178.7 million from $129.8 million during the same period the prior year. Income from continuing operations increased 60.6% to $28.6 million, or 44 cents a share, from $17.8 million, or 27 cents a share.

“We are pleased with our results, which include record fourth quarter and annual net sales and profits and a substantial expansion of our gross margins,” said James Debney, Smith & Wesson’s president and CEO. “Our successful performance was driven by solid marketing, innovative new products, disciplined manufacturing execution, and strict financial management.”

The company said it increased production capacity during the quarter, but still was unable to meet ongoing demand across most of its firearm product lines, resulting in additional growth in order backlog.

Strong product demand coupled with expense control was a potent combination that allowed the company to produce stunning improvement in key financial metrics. For example, gross margins expanded to 38.3% of sales from 36.1% of sales, operating expenses declined to 12.1% of sales from 16.3% of sales. As the gross margin and expense rates headed in opposite directions, Smith & Wesson’s operating margin expanded to 26.2% in the fourth quarter compared to 19.8% the prior year.

For the full year, the company’s sales increased 42.6% to a record $587.5 million and firearm production capacity increase by 40.4%. Income from continuing operations was $81.4 million, or $1.22 a share, compared to $26.4 million or 40 cents a share the prior year. Full year gross margins expanded to 37.2% from 31.1% and operating expenses declined to 14.6% of net sales compared to 20.2%.