Smith & Wesson 2Q Loss Sends Shares Plunging After Hours

Led by weaker prices for firearms, Smith & Wesson (NASDAQ:SWHC) reported late Wednesday a second-quarter loss over a year ago profit, sending its shares tumbling after hours.

The Springfield, Mass-based company posted a net loss of $37.3 million, or 62 cents a share, compared with a profit of $14.4 million, or 22 cents a share, in the same quarter last year.

Excluding one-time items, including the partial impairment of USR assets as well as Department of Justice and SEC investigation costs, the company earned 5 cents a share in the period ended Oct. 31, ahead of average analyst estimates polled by Thomson Reuters of break-even earnings.

Revenue for the holding company, which makes firearms and other safety, security, protection and sport products, was $96.3 million, down 12.2% from $109.7 million a year ago, missing the Street’s view of $99.8 million.

Firearm revenue fell 10.5% to $83.6 million in the quarter from $93.4 million in the year-earlier period, a time when the industry as a whole experienced strong demand.

“As overall purchasing of firearms moderated during the quarter compared with the record levels a year ago, total sales came in slightly below our previously issued guidance,” said Smith & Wesson CEO Michael F. Golden. “The environment has become increasingly challenging, leading us to the decision to lower our revenue outlook and to partially impair certain intangible assets related to our USR acquisition.”

Despite the challenges however, higher shipments of personal protection handguns partially offset softer firearm sales, and the company said it will continue expanding its business beyond firearms, potentially tapping into the perimeter security market.

Last quarter, its perimeter security division came in slightly lower than a year ago, however that dealt primarily with lower backlog and delays in funding for several customers.

In November, the Smith & Wesson expanded its revolving credit line to $120 million from $60.0 million, providing the company with enough flexibility on its balance sheet to fund its strategic initiatives.