Gun Rights

The Trump Effect On Firearms




The Trump Effect On Firearms

By Char­lie Lunan

Fol­low­ing eight years of explo­sive growth that saw the num­ber of fed­er­al­ly licensed man­u­fac­tur­ers more than triple, the firearms indus­try poised for con­sol­i­da­tion.

Sales data from SSI Data show year-over-year sales of firearms declined in the high sin­gle dig­its in Decem­ber, com­pared with a 16.4-percent decline in fed­er­al back­ground checks made through the NICS sys­tem run by the FBI. Sales of cen­ter­fire, semi-auto­mat­ic rifles, includ­ing mod­ern sport­ing rifles, or MSRs, fell 21.6 per­cent. The declines marked a sharp rever­sal in such sales, which had been dou­bling and tripling in the eight weeks lead­ing into the elec­tion thanks in part to California’s new ban on MSR sales, which took effect Jan­u­ary 1.

Decem­ber marked the first time SSI Data has report­ed a year-over-year decline in month­ly sales in two years and the first time the FBI has report­ed such a decline in NICS checks in two years.

There were a lot of back­ground checks for Black Fri­day, but from what we can see sales were not near­ly as robust in the wake of the elec­tion,” said SSI Data Client Solu­tions Spe­cial­ist Odie Tuck­er. “There was this huge demand fueled over the last eight years due to uncer­tain­ty over gun rights, but there is actu­al­ly a large amount of uncer­tain­ty now about demand.”

A Rash Of Dis­count­ing
The sharp decel­er­a­tion result­ed in a spike in dis­count­ing last month as big-box retail­ers and oth­er deal­ers who loaded up on MSRs and oth­er firearms in antic­i­pa­tion of a Clin­ton vic­to­ry shift­ed to clear­ance mode.

We saw some of the big box­es do some pret­ty strong dis­count­ing after the elec­tion, par­tic­u­lar­ly after Thanks­giv­ing,” said Lar­ry Hyatt of Hyatt Guns in Char­lotte, NC. “Unless their buy­ing is a lot dif­fer­ent than ours, they are sell­ing at cost.”

Hyatt Guns stocked up on MSRs and ammu­ni­tion going into the elec­tion but “did not go hog wild,” fig­ur­ing that even if the Democ­rats took the White House and Sen­ate they would need at least 18 months to get new gun leg­is­la­tion before Con­gress. By the third week of Decem­ber, how­ev­er, Hyatt’s buy­ing Sports Inc. was advis­ing its mem­bers to enter “inven­to­ry reduc­tion mode.”

We think demand for MSRs will dimin­ish,” said Hyatt. “The fear of a gun law pass­ing because of an event is going to dimin­ish some. We want to have less inven­to­ry because we think cash will be more impor­tant next year.”

A quick check in ear­ly Jan­u­ary showed Cabela’s, Gan­der Moun­tain and Sportsman’s Guide offer­ing dis­counts in the 10 to 15 per­cent range on a selec­tion of entry lev­el MSRs from such brands as Amer­i­can Tac­ti­cal Imports, Smith & Wes­son, Ander­son, Ruger, Troy and Moss­berg.

The Oba­ma Boom
There is no deny­ing that the firearms indus­try flour­ished dur­ing the Oba­ma Admin­is­tra­tion. In the sev­en fis­cal years end­ed Sep­tem­ber 30, 2015, the annu­al aver­age growth rate (AAGR) of firearms pro­duc­tion accel­er­at­ed to 14 per­cent from the 5 per­cent seen dur­ing the pre­ced­ing sev­en fis­cal years, ATF data show.

The era was marked by volatil­i­ty, which most ana­lysts attribute to a per­cep­tion that the risk of tighter gun con­trol was sig­nif­i­cant­ly high­er under the Oba­ma Admin­is­tra­tion. This made con­sumers high­ly sen­si­tive to any news that might lead to restric­tion of MSR sales.

In Decem­ber 2015, for instance, NICS back­ground checks surged by 1 mil­lion, or 43.5 per­cent, from a year ear­li­er in the wake of a mass shoot­ing in San Bernardi­no, CA. SSI Data fig­ures show total gun sales grew by near­ly a third that month, while sales of MSRs more than tripled. The week after a gun­man killed 49 peo­ple at a gay night­club in Orlan­do last June, MSR sales surged ten­fold and NICS checks swelled by 600,000, or 40 per­cent. By year end, MSR sales were up high dou­ble dig­its for the sec­ond con­sec­u­tive year, accord­ing to SSI Data.

What you are deal­ing with is an extreme­ly respon­sive mar­ket,” said Tuck­er of SSI Data. “Almost crazy respon­sive, because it swings both ways.”

All of the top 10 days for NCIS checks have occurred since 2012 and sev­en of those occurred between Thanks­giv­ing and Christ­mas, accord­ing to FBI data. Even after the Repub­li­cans gained con­trol of the Sen­ate in the 2014 mid-term elec­tions, deal­ers could count on spikes in traf­fic and sales fol­low­ing news of gun vio­lence or new laws restrict­ing gun sales and own­er­ship.

The MSR Assem­blers
Toward the end of Obama’s sev­enth year in office, the num­ber of fed­er­al­ly licensed firearms man­u­fac­tur­ers had reached near­ly 10,500, up from just 3,000 when he took office.

Some of that growth came from a cot­tage indus­try that sprang up to meet demand for entry-lev­el MSRs, which are sold for $600 to $700 at retail. Entre­pre­neurs who could obtain licens­es were able to launch their own brands sim­ply by assem­bling receivers, bar­rels, rails, stocks and oth­er com­po­nents pur­chased on the open mar­ket.

While MSR sales have cer­tain­ly been dri­ven by con­sumers’ fear of ter­ror­ism and gun con­trol, the rifles con­tin­ue to gain pop­u­lar­i­ty among tar­get shoot­ers and younger hunters, as evi­denced by the grow­ing array of such rifles being offered with Kryptec cam­ou­flage designs.

It’s the most acces­soriz­able firearm plat­form out there,” said Thomas Carl­son, direc­tor of mar­ket­ing com­mu­ni­ca­tions for Daniels Defense, which is work­ing through a three-month back­log of orders for its high-end MSRs. “You can buy a DD MSR and put any rail or bar­rel you’d like on it. That’s real­ly why it’s so pop­u­lar and why the acces­sories mar­kets is so hot.”

The Big Boys Move In
The prob­lem for the MSR assem­blers is that demand now appears to be drop­ping even as com­pe­ti­tion from major gun man­u­fac­tur­ers is ris­ing, said SSI Data’s Tuck­er.

There are a good deal of man­u­fac­tur­ers who owe their exis­tence entire­ly to the boom,” he said. “Many have nev­er oper­at­ed in a declin­ing mar­ket.”

Sav­age Arms, a hunt­ing rifle brand owned by Vista Out­door Inc., launched its first line of MSRs at SHOT Show. The line includes four rifles rang­ing in price from $850 to $2,300.

The CapEx and R&D to be able to devel­op a full line of mod­ern sport­ing rifles is de min­imis,” Vista Out­door CEO Mark DeY­oung told ana­lysts in Novem­ber. “It is an easy way for us to sup­port our cus­tomers that are look­ing for those kinds of long gun solu­tions and do it in a very low invest­ment approach.”

Rem­ing­ton Out­door Co. said it increased pro­duc­tion of low­er-priced MSRs, includ­ing a new entry-lev­el rifle from Bush­mas­ter, in the third quar­ter to respond to demand for low­er-priced rifles. Last May, the com­pa­ny announced it would close a fac­to­ry in Ken­tucky and move its prod­uct equip­ment to a plant in Alaba­ma to dri­ve down costs.

In ear­ly Novem­ber, Sturm Ruger & Com­pa­ny Inc. report­ed unit sell-through of its prod­ucts by dis­trib­u­tors grew faster than NICS check, indi­cat­ing it gained mar­ket share for the sec­ond con­sec­u­tive quar­ter.

Daniels Defense, which dwells at the high end of the mar­ket, is mov­ing for­ward with plans to dou­ble pro­duc­tion of MSRs, rail sys­tems and acces­sories from 2015 lev­els at its plant in Geor­gia.

Over­stor­ing
Exclud­ing pawn­bro­kers or col­lec­tors, the coun­try added near­ly 8,000 fed­er­al­ly licensed firearms deal­ers from 2009 to 2015, or near­ly 70 per­cent of the num­ber lost dur­ing the pre­ced­ing sev­en years.

Hyatt Guns Pres­i­dent Lar­ry Hyatt esti­mates that eight new indoor hand­gun ranges with show­rooms and sev­en big-box stores opened in the span of a few years in the Char­lotte-Gas­to­nia-Con­cord met­ro­pol­i­tan sta­tis­ti­cal area where his store com­petes. Dick’s Sport­ing Goods, Cabela’s, Bass Pro Shops, Acad­e­my and Gan­der Moun­tain all oper­ate in the region, which is home to about 2.5 mil­lion peo­ple.

We now have 16 big-box com­peti­tors with show­rooms,” said Hyatt, a sec­ond-gen­er­a­tion own­er-oper­a­tor who plans to hand off the busi­ness to his son Mitch this year. “So we had a lot of growth in gun sales, but a lot of huge retail­ers opened, so there was not a great ben­e­fit to indi­vid­ual retail­ers.”

The Hyatts expect gun sales to still be good this year, but not as brisk as they were in 2015 and 2016. If demand falls more than 10 per­cent, though, things could get ugly fast. “My feel­ing is that with the inter­net and the over-expan­sion of retail, we are in store for a rough ride, par­tic­u­lar­ly on mar­gins,” he said.

Based on con­ver­sa­tions with col­leagues across the indus­try, Carl­son fore­sees a broad slow­down in MSR sales in July and August.

I think a lot of small assem­blers will go away and we will see larg­er com­pa­nies com­pete for shelf space,” he said. “It’s going to come down to how aggres­sive the larg­er com­pa­nies get spend­ing on mar­ket­ing and pub­lic rela­tions.”

Carl­son said a purge might be healthy giv­en the poor cus­tomer ser­vice offered by many star­tups. Still, he was among many expect­ing a very upbeat vibe at SHOT Show. “I think every­one in our indus­try is breath­ing a sigh of relief because as much as I dis­agree with [Trump] on many things, he is not com­ing after our jobs and liveli­hood.”

Source: The Trump Effect On Firearms | SGB Online




Previous post

Violent protests break out in D.C. ahead of Trump inauguration

Next post

Kalashnikov USA Selling First American-Made Guns Next Month

ER1C ☠

ER1C ☠

Dedicated Second Amendment Advocate, At-Home Gunsmith, Designer, Blogger, Video Guy, Author, Business Owner & ReloadOne Member.

No Comment

Leave a reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

SHARE

The Trump Effect On Firearms