Drop in long gun demand impacts Smith & Wesson


Smith & Wesson (NASDAQ:SWHC) reports decreased sales of long guns contributed 87% of the company's FQ1 revenue tailoff.

Gross margin rate -540 bps to 37.2% due in part to the shift in mix away from long guns.

Operating expense ratio +320 bps to 17.7%.

The company sees FY15 EPS of $0.89-$0.94 vs. $1.34 consensus.

Shares of SWHC are under a trading halt.

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Comments (7)
  • AlainP
    , contributor
    Comments (64) | Send Message
     
    anyone wants to discuss options strategy for the stock with this big drop? Sure there is money to be made here.
    26 Aug 2014, 04:58 PM Reply Like
  • cn_habs
    , contributor
    Comments (581) | Send Message
     
    This is gonna be ugly...
    26 Aug 2014, 05:06 PM Reply Like
  • capitolp
    , contributor
    Comments (716) | Send Message
     
    Never understood why they bought Thompson Center, can't recall what they paid but sure it was too much, and no money left in the AR platform, market is completely over supplied with years worth of inventory floating around at rock bottom prices.
    27 Aug 2014, 12:34 AM Reply Like
  • Darren McCammon
    , contributor
    Comments (4320) | Send Message
     
    Consumer long life hard good is significantly overbought by the public due to fear. Lack of supply creates even more demand including forward ordering by retailers. Producers see themselves as missing out on this demand and over time increase production. A bubble is forming. Stock prices increase. Producers continue to have trouble filling demand. Backlog increases.

     

    End user demand starts to slow, suddenly the channel is stuffed. Time to short the producer. Retailers decrease orders and start to cancel existing bookings. Producers are geared for higher demand and can't react fast enough so their inventory also increases. Channel and producers are stuffed and start discounting prices to clear inventory. Producer sales fall. Margins fall. Expenses don't. Quarterly numbers show declines and the stock declines sharply. Stock owners have anchored, they talk about slightly less earnings and low trailing P/E ratios. Producers hesitantly start to cut back on expenses and production, laying temps off first but the depreciation on the new product lines and plants keeps coming. Throughout the system producers resist more drastic cuts, don't want to lay full timers off and don't want to lose market share. They reduce production and cost incrementally. They remain behind the curve. Production is eventually reduced to "normal" level but overall inventories are still high. End user demand has fallen below "normal" due to earlier forward buying. Producer demand falls even further below that because the channel is still full and the producers still have excess inventory they need to work off. Sales and margins fall further. Producers are forced to lay full time staff off and shut down existing production lines. Prices get cut below marginal cost in an attempt to clear inventory. Producers not only lose money but start losing more money with each additional sale. Investors start talking about book value as support. The bottom of the cycle is near, time to cover the short position.

     

    Disclosure - short RGR
    27 Aug 2014, 12:59 AM Reply Like
  • Jake2992
    , contributor
    Comments (1138) | Send Message
     
    Come on gun nuts, Obama is going to take your guns get out there and buy more bullets and guns!
    27 Aug 2014, 11:29 AM Reply Like
  • capitolp
    , contributor
    Comments (716) | Send Message
     
    Gun Nuts don't run out and buy on fear, we are the ones laughing when everyone else does.
    27 Aug 2014, 12:32 PM Reply Like
  • cn_habs
    , contributor
    Comments (581) | Send Message
     
    What's behind the recent rise of SWHC and RGR?
    15 Feb 2015, 10:51 PM Reply Like
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