Sturm Ruger (NYSE:RGR) reported stronger gun sales in the second quarter, as the 2016 presidential race drives Americans to stock up on handguns and rifles.
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CEO Michael Fifer said Ruger has no way of measuring the political impact on its U.S. sales. However, the upcoming elections appear to be a catalyst for consumer demand, particularly given Hillary Clintonâs proposals for gun-control measures.
âThis is a unique time in our history because for the very first time ever, we have the nominee of a major political partyâone with a very reasonable likelihood of winning the presidencyâovertly stating that the Supreme Court got it wrong in the Heller case and actively campaigning against the lawful commerce in arms,â Fifer said Wednesday during Rugerâs earnings call, referring to the Democratic nominee. âThatâs unprecedented. It would be hard for any of us to believe that didnât have some impact, but it canât be measured.â
The Supreme Court affirmed the individual right to bear arms in the landmark case of District of Columbia vs. Heller. On the campaign trail, Clinton has said she would repeal the Protection of Lawful Commerce in Arms Act, a law that protects gun manufacturers and retailers from liability claims.
Ruger is matching donations to the National Rifle Associationâs Institute for Legislative Action up to $5 million through the November election, in addition to $2 donations for every Ruger firearm sold until Nov. 8.
âWe are encouraging our customers and all Americans to have their voice heard and to vote in the November elections. I have no doubt about it. The makeup of the Supreme Court is on the ballot this November, and therefore the Second Amendment is also firmly on the ballot,â Fifer said.
With renewed calls for more gun regulations, sales are building momentum heading into the November elections. Background checks processed by the FBI easily set a new all-time high in 2015, capped by a monthly record of 3.3 million in December. The FBI has since reported record highs in each month of 2016 through July. When adjusted to strip out non-purchasing activity like permit applications, background checks in June were up 28.6% year-over-year, according to the National Shooting Sports Foundation.
Shares of Smith & Wesson (NASDAQ:SWHC) hit an all-time high of $30.59 earlier in the week, and the stock has rallied about 35.6% since the beginning of the year. After a selloff on Wednesday, Ruger was holding a 9.8% gain year-to-date.
Ruger reported net sales of $167.9 million in the second quarter, up 19% over the same period last year. The gun makerâs profit surged 34% to $23.5 million, or $1.22 a share. Both earnings and revenue topped Wall Streetâs estimates.
The Southport, Connecticut-based company increased production of several products that are in strong demand, contributing to the quarterâs sales gains. New products launched in the past two years, including the Ruger American Pistol, Precision Rifle and AR-556 rifle, accounted for 33% of the companyâs firearm sales during the three-month period. Ruger also cited retail strength across the industry.
Ruger estimates that independent distributors sold 20% more firearms to retailers. Those shipments outpaced the 15% growth in the number of FBI background checks adjusted by the NSSF.
Fifer noted that demand spiked only for short periods after recent terrorist attacks, such as the attack in Orlando in June. He said distributors took a higher number of calls after the Orlando attack, but those requests quickly normalized.
Also on Wednesday, Ruger announced plans to have President and COO Christopher J. Killoy succeed Fifer as CEO in May 2017, when Fifer will retire. Killoy, a graduate of the U.S. Military Academy at West Point, has previously held positions with General Electric (NYSE:GE), Smith & Wesson and Savage Arms, which is owned by Vista Outdoor (NYSE:VSTO).