The Column, No. 110:
Is the Firearms Industry in Disarray?
This is a question I am asked almost daily. While President Donald J. Trump is very good for the Second Amendment, in the short term the firearms industry is a bit of a mess.
While the Obama administration was ineffectual at fighting crime, it was quite effective at harassing the Constitutional rights of American citizens. The result was hoarding and panic buying, for it was clear that President Obama had an undeclared war on the Second Amendment.
Hillary Clinton promised not just more of the same, but her ridiculous lies threatened to set fire to the Second Amendment for good. It was Hillary Clinton (and Bernie Sanders) who delusionally claimed the firearms industry had immunity from litigation (and wanted to end it). Anyone knows, or should know, that if you make stepladders, lawnmowers, or firearms, you are going to get sued constantly.
Firearms industry professionals had to guess what 2017 would be like and many guessed wrong. You might think anyone who wants an Armalite rifle, by now, would have at least eleven of them. Yet, despite the large number of Armalite platform rifle manufacturers out there, Savage Arms decided to belatedly join the crowd. The holding company that owns Savage Arms, Federal Ammunition, CCI, Bushnell, Weaver and dozens of other outdoor companies is Vista Outdoors.
Marketwatch reported, on January 12, 2017:
"Vista Outdoor Inc.'s stock (VSTO) plunged 17% toward a record closing low in active morning trade Thursday, after the maker of guns, ammunition and other outdoor sports products said an increasingly challenging retail environment will force it to record a material asset impairment charge."
This is doublespeak for writing off worthless goodwill and the like. It gets worse:
"RADNOR, Pa., Jan. 26, 2017 /PRNewswire/ -- The law firm of Kessler Topaz Meltzer & Check, LLP announces that a shareholder class action lawsuit has been filed against Vista Outdoor Inc. (NYSE: VSTO) ('Vista' or the 'Company') on behalf of purchasers of the Company's securities between August 11, 2016 and January 13, 2017, inclusive (the 'Class Period')."
There have been other developments, as well. The Turkish lira has been tumbling since the recent failed coup attempt and continues its plummet. The Turkish lira hit a record low against the U.S. dollar (3.73 to the dollar) and the Euro on January 9, 2017 and remains close to this absurdly low level. Turkish firearms and components just got a whole lot cheaper.
That forces manufacturers to source parts from Turkey, if they want to be competitive in the marketplace with those who already do. The net result tends to favor the consumer in the short term, but is bad for the domestic manufacturer in the long term.
The same is true with components for reloaders and inexpensive rimfire ammunition. The many years of hoarding and the self inflicted wounds of panic buying have diminished, so now we can again expect old fashioned competition for your buying dollars, a good thing for the consumer.
Self defense segments continue to rise, as does gun use for protection, hunting and target shooting by the fairer sex. AR-15 platform rifles are increasingly used for hunting. (Despite their general inferiority to traditional hunting rifles in accuracy, balance, handling, power, reliability, etc. -Editor)
The great unknown remains the economy. If the stagnation of the last decade is shed and consumers have more discretionary funds available for hunting and target shooting, both of those areas will increase. Cheap is rarely good and good is rarely cheap. Our perception of affordability is tethered to our discretionary funds.
Copyright 2017 by Randy Wakeman. All rights reserved.