Smith & Wesson Brands Inc. (NASDAQ: SWBI), a renowned gun manufacturer (founded in 1852) headquartered in Springfield, Massachusetts, has a problem. School shootings are not the issue. Rather, Smith & Wesson has been selling too many guns and is running low on its inventory.
During the company’s first quarter earnings call, the CFO Deana McPherson said that internal inventory levels are “well below our target.” This call came as the world learned of yet another school shooting, this time in Winston-Salem, North Carolina.
Numbers From the Quarter
What Smith & Wesson calls its “first quarter” is the quarter ending July 31. Aside from the potential inventory problem, other numbers from that quarter might seem positively cheerful to investors. For example, Smith & Wesson reported a net income of $1.57 a share. That was well above estimates. Analysts had been predicted net income of $1.26.
Sales in the quarter were 19.5% above what they had been a year before, or in absolute terms $274.6 million. There are a couple of reasons for the high level of sales: target shooting and hunting are outdoor activities that one can do in a ‘socially distant’ manner, so they are pandemic-appropriate.
The second consideration: the level of social unrest (for lack of a better term) got an upward kick from the murder of George Floyd in May 2020 and again from the trial of Officer Derek Chauvin for that killing, in April 2021. A lot of people have bought guns believing it a necessary measure to protect themselves, their families, and homes in these times.
Between them, these two factors have boosted gun sales to a point that Smith & Wesson did not anticipate: thus the worry about inventory. Company CEO Mark Smith said, “[A]s always, supply chain risks are subject to change and our team continues to develop contingencies to offset and avoid” any resulting shortfall.
A wise guy might say that this would be an appropriate time for someone to play a sad song on the world’s smallest violin for Smith & Wesson’s trouble.
An All Too Familiar Story
A new place, a new city and school name, but an all-too-familiar story in the United States played out Wednesday afternoon, September 1: Special reports broke into your regularly scheduled programming to tell you that Mount Tabor High School, in Winston-Salem North Carolina, had been put on lockdown after a report of an active shooter.
Familiar sights from many a school shooting past unfolded on our screens: Parents parking blocks from the school as they were allowed, congregating with one another asking anxious questions, and authorities usually in those early hours, responding that they didn’t have the answers.
Most of those parents were soon united with their child or children. But there was one fatality. William Chavis Raynard Miller Jr. was shot at Mount Tabor and rushed to Wake Forest University Baptist Medical Center. He was later reported dead.
The police have not revealed what weapon was used in the shooting of Mr Miller. Indeed, they are giving few particulars about their investigation. So we cannot know whether the weapon is a Smith & Wesson.
But we do know that Smith & Wesson made the rifle that was used in the February 14 murder of 17 people at Marjory Stoneman Douglas High School in Parkland, Florida, in 2018. They also armed the killer who shot up a movie theatre in Aurora, Colorado, that killed 12 in July 2012.
A Slightly More Rational World
It seems likely that in some slightly more rational world, developing in a cosmic parallel with this one, yet another school shooting, a vivid reminder of those early events, would give Smith & Wesson other sorts of trouble. Its executives would fear popular revulsion, litigation, and perhaps political action.
In this world, though? They only fear is selling too many guns and running out.
The price of SWBI did fall Thursday: whether this was a consequence of the earnings call or the news from Winston-Salem is hard to say. The price of SWBI did fall recently: whether it was a consequence of inventory issues or the school shooting or something else is hard to say. The Motley Fool seems to think that the problem is that investors fear that the recent “torrid pace” in gun sales will be difficult to maintain in coming quarters. That explanation is worth another tiny violin.
This is an opinion piece. The views expressed in this article are not necessarily the views of the Breaking Daily News editorial board. The writer is sharing his opinions, and his opinions alone.