In a Republican-controlled country, it is a bad time to own gun stocks.
During the Obama years, there were constant threats about gun control and gun confiscation in a Democrat-controlled White House, which prompted Americans to purchase firearms as quickly as possible. Today, the GOP is still pretty adamant about defending gun rights.
As a result, Americans aren’t exactly in a hurry to buy a pistol, and this is impacting overall sales, causing a ripple effect in other market aspects.
There is another trend in the gun market: the rising cost of bullets.
Lead is the conventional bullet core material, and traditional bullet jackets are manufactured with copper. Since June 2016, lead prices have been surging, and over the last 12 to 15 months, copper prices have skyrocketed.
With increasing commodity prices, it is becoming more expensive to produce bullets. Moreover, it is expected that ammunition prices are only going to jump even further.
From Bloomberg:
The firearms industry has been experiencing a downturn. Stock prices have dwindled and sales are down year-over-year, based on figures from the National Instant Criminal Background Check System, a barometer for firearms sales. Even the industry’s most established companies aren’t free of market impact. Remington, which was founded in 1816, announced it would file for bankruptcy earlier this week.
Vista reported sales of $581 million, an 11 percent decrease from the previous year, but still beat expectations. Since its earnings report on Feb. 8, shares have soared 14 percent.
“Shooting Sports recorded third-quarter sales of $286 million, down 21 percent from $361 million in the prior year quarter, as a result of persistent lower demand in the market for ammunition and firearms,” the executive said during the call.
Metz believes the ammunition price increase will ripple through the industry as competitors follow suit. Customers have been “very understanding” of the price increases so far, he said.
“We’re fortunate that we have extremely close relationships with our customers,” he said. “We are putting forward price increases that we think are realistic and, so far, what we’ve seen from buying behavior is no real changes.”
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