The Real Reason Gun Sales Are Booming (It's Not What You Think)

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There are a lot of ideas floated for why gun sales are booming, but most of them are wrong. From time to time, a mass shooting, a terrorist incident, or calls for stricter gun control legislation will have an impact on when a purchase is made, but those aren't the primary motivating factors in gun sales, which have more than doubled over the past decade.

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Neither is it the belief that it's really just a tiny subset of the population that's actually stockpiling firearms, while the vast majority of the country shuns them. While many gun owners do own more than one gun, almost half of U.S. households have at least one firearm in the home. In fact, it's because so many people are buying guns -- and not just for self-defense purposes -- that we're seeing gun sales soar.

A targeted opportunity

A recent National Shooting Sports Foundation's (NSSF) research report shows there is a huge influx of people coming into shooting for sport. The number of individuals participating in target shooting surged to 49.4 million people in 2016, a 44% increase from the 34.4 million that participated back in 2009. The information they've teased out from the data holds important implications for the industry.

Most people are familiar with the fact the FBI last year conducted record numbers of background investigations on individuals wanting to purchase a firearm. Whereas the law enforcement agency had run more than 10 million checks through its National Instant Criminal Background Check System (NICS) in 2006, that number had exploded to over 27.5 million investigations a decade later.

In that time period, American Outdoor Brands (NASDAQ: AOBC) has seen sales of Smith & Wesson firearms grow from $221 million to $584 million in just the first nine months of its current fiscal year, while Sturm, Ruger (NYSE: RGR) witnessed an increase in sales from $139 million to $658 million over the same time frame.

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Along the way, tragic or chilling events would lead to a spike in sales, whether for fear of greater gun control measures being introduced, such as after the Sandy Hook shooting, or for a desire for greater personal protection, such as after the San Bernardino shooting. Yet despite these isolated attacks, the trend has always been one of greater growth -- more than can be explained away just by these occurrences.

Demand remains elevated

And the numbers continue to expand. Although the number of background checks experienced a sharp drop after the November elections (which many analysts extrapolated to mean the gun industry itself was heading into a period of decline under President Trump), what they missed was that the number of criminal investigations were still significantly higher than they had been in 2015, the previous record year. Sales were growing, just not at the white-hot pace they had been.

For example, this past May, the FBI processed over 1.9 million backgrounds checks, an increase of more than 70,000 from the May 2016 number and a record for the month. The NSSF, however, goes one better and adjusts the raw NICS data to eliminate checks that are solely for permits, such as on those individuals with a concealed carry weapon permit. The adjusted numbers give a closer approximation of actual market conditions.

The NSSF's May data showed that some 988,473 checks were performed, a 6.5% increase from last year and an indication the industry is still very much growing. Yet it also says the industry is changing: "New shooters are younger, are more female and increasing diverse in ethnicity. The shooting sports are affordable, accessible, and more inclusive than ever before and people are taking full advantage."

A virtuous cycle

It notes that new shooters may have their first introduction to firearms through use of a rental or a loaner gun, and then finding the sport enjoyable, purchase one for themselves. They may even go on to buy more than one. Similarly, for those people who purchase a firearm for self-protection find they also enjoy the training they received and return for continued practice.

In 2015, the NSSF found females to be one of the fastest-growing groups in the sport as women involved in target shooting grew from 3.3 million to 5.3 million between 2001 and 2013. The National Rifle Association also said the number of women owning firearms jumped 77% between 2004 and 2011.

In short, more people have come to shooting sports, which as the NSSF says, is more affordable, accessible, and inclusive than ever before. While national events may occasionally raise the profile of the industry and bring new people in, once here, they find it's a lot of fun and continue with it.

The gunmakers themselves have responded to the change by developing firearms that appeal to these new shooters. It's not just hot pink pistol grips for women (though there is some of that), but rather lighter, more comfortable firearms that are still accurate and pack some serious firepower. Accessories are also being designed that make carrying a firearm easier for women.

And that's why gun sales are still booming.

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Rich Duprey has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.