Gun glut: Industry’s woes go beyond politics
NEW YORK: Just two days before the school shooting in Florida revived the US gun control debate, debt-plagued gunmaker Remington Outdoor announced it will file for bankruptcy.
The financial woes of the more than 200-year-old company illustrate a paradox of the Trump era: weapon manufacturers miscalculated, ramping up production in anticipation of a Hillary Clinton presidency that would drive sales of those fearing increased gun control.
Instead, they got a period of political dominance for the powerful gun lobby accompanied by financial fragility for the gunmakers.
Since Donald Trump was elected president in November 2016, gun manufacturers have struggled to deal with excess supply, forcing them to rein back manufacturing, cut jobs and slash prices, as well as prompting some executives to be replaced.
“Because Republicans are in control of both the White House and the Congress, the threat of increased gun regulation went way down and so the stocking behavior of consumers went way down,” said Emile Courtney, an analyst at S&P Global Ratings. But since the Feb 14 Parkland shooting, which left 14 students and three teachers dead, survivors from the Florida school have emerged as powerful advocates for gun control, urging Trump and others to take action. A stampede of major companies, including insurers Chubb and MetLife, security company Symantec and rental car giants Avis Budget Group, Enterprise Holdings and Hertz joined others in ending discount programs for National Rifle Association members. The move came amid heightened pressure from some consumers as the ‘#BoycottNRA’ hashtag trended on Twitter.
If past trends hold, the revived talk of gun restrictions in the wake of the mass shooting will boost gun sales as more consumers stockpile weapons amid worries they could be banned.
But it is unclear how that will affect the companies’ bottom line amid a rising tide of antagonism toward the gun lobby.
Sturm Ruger Company this week became the latest industry player to detail the hit from slackening sales, reporting a 40 per cent drop in 2017 profits to US$52.1 million, a sharp pullback from the assessment of ‘stronger-than-normal demand during most of 2016.’
The company cut manufacturing of its firearms and has eliminated 700 jobs over the last year, 28 per cent of its workforce, executives said on a conference call this week. Sturm Ruger chief executive Christopher Killoy said the company had made progress in working down inventory amid the tough climate.
Christopher Metz, who was hired as chief executive of Vista Outdoor in October, said pricing is now ‘much more rational’ compared with a significant part of last year.
“There were competitors that were trying to catch up with the kind of falling off the cliff demand,” Metz said early this month.
In the wake of the Parkland shooting, Trump has opened the door to some changes, such as endorsing a ban on ‘bump stocks,’ an accessory that can turn a semi-automatic weapon into an automatic one, and urging stronger background checks.
But the president, who praised the National Rifle Association as ‘very, very great people,’ also favors arming teachers, a stance ridiculed by educators.
Jeff Pistole, a gun dealer in Arkansas, expects the headlines to boost gun sales in the short run, especially for the AR-15, the gun used in Florida and many other mass shootings.
“Every time there’s a shooting, the price spikes on them and then after everything settles down, the price falls back down on them. And after Trump got elected, they got really cheap,” he said.
Pistole said the response to Parkland by gun control supporters has been much more muscular compared with the Las Vegas shooting in October, which resulted in 58 fatalities.
“There’sbeenalotof backlash,” he said. “At first, people are saying ‘Oh, Trump’s president, we’re not worried ...’ but with this one, there’s a lot going on in the media, so people are paying attention to it.” — AFP
Because Republicans are in control of both the White House and the Congress, the threat of increased gun regulation went way down and so the stocking behavior of consumers went way down. — Emile Courtney, S&P Global Ratings analyst