Ah, it’s a presidential election in the offing and a man’s (or woman’s) fancy turns not to spring, love and all that, but to their guns and whether they should have one, or whether they have enough.
So, with a Democrat President up for re-election, many Americans seem increasingly fearful for their future, or rather, for the future of their guns. So what do they do when confronted with the remote possibility that there might be a tightening in gun control laws if the Barack Obama wins? Why, they make sure of their right to bear arms by haring off to their local gun shop and buying a few more. They did it in 2008 in their millions as Obama election loomed, and they are again doing it in 2012.
In fact, figures from the FBI’s background checking system for gun purchases shows that every month this year has seen record levels of checks conducted by it. The total number is well on its way to ending this year close to 18 million, up from the 16.454 million in 2011. If you go back to 2007, the year before the last presidential election, 11.177 million checks were conducted. That jumped to more than 12.7 million in 2008, a rise of nearly 14%.
And the number of applications could end up nearly 50% above the 2008 level. So far this year just over 10.2 million checks were conducted in the seven months to July, which is more than were conducted in all of 2006. Compared with the first seven months of 2008, the number of checks conducted this year is up nearly 33%. February and March of this year saw rises of 30% and more from the same months in 2011. Not even the steady stream of mass shootings can be said to be the main driver. There are mass shootings on a seemingly regular basis in the US.
Now these checks can’t be correlated with actual purchases. The number of checks is an indicator. But even after considering the FBI caution, the gun business is booming and has done so during the Obama years. And because there was a big surge after 9/11, conservatives and others try to play down the surges in applications (and sales) in 2008 and so far this year as part of a “long-term trend” driven by fears about terrorism. The terrorism is home grown and coming from American gun owners, as the shootings earlier this month at a Sikh temple in Wisconsin have been so described by police. What is clear is the spike in applications, which started in 2008, and had nothing to do with mass shootings or terrorism of any form, shows no sign of ending.
Naturally this fear and loathing has been good for the two main listed companies, Smith and Wesson and Sturm, Ruger & Co see strong sales. In fact, so solid was demand for Sturm, Ruger & Co at the start of the year that it had to stop taking new orders in March while it filled back orders at its over-stretched factories. It only started taking new orders in May.
Smith & Wesson saw a 28% jump in fourth quarter profit (ended April 30) with revenues a record $US129.8 million from a year earlier. In fact S&W is a right little gold mine with the sort of profitability that many companies in less controversial industries can only dream of. For the full 2011-12 financial year, the company saw a 20.4% jump in net sales from continuing operations to a record $US412.0 million. Gross profit margin was 31.1% compared with 30.6% for the prior year, and despite sharp rise in business, operating expenses fell from a quarter of sales in 2010-11 to just over 20%. Beats pushing dolls or milk out the door to picky buyers.
Smith & Wesson didn’t hold back, telling the market that the upcoming US presidential elections and an expanding consumer-base will drive strong firearm sales in the current financial year. It expects a 36% rise in first quarter profit (which ended on July 31) and a slower 17% rise for the 2012-13 financial year
Sturm Ruger’s second-quarter results showed a 50% year-over-year jump in sales to $US119.6 million. Second-quarter net profit leapt 80% to $US18 million, from just over $US10 million. For the six months ended June 30, 2012, net sales were $US231.9 million, up from $US155 million in the first half of the previous year.
Given that background it’s no wonder Smith and Wesson shares were up 88% for the year to last Friday. They had doubled but fell 14% last week after a broker downgraded their outlook, and those of Sturm Ruger, whose shares were up 35% (but only fell 4% last week after the downgrade).
Given the number of outrages involving guns in the US, I suppose it’s not that odd that sales and business levels are buoyant. There are about 30,000 deaths in the US as a result of firearms use. In fact in 2006, the Centre For Disease Control reported that a total of 30,896 people died from shooting, of which, 642 were accidental, 16,883 were suicide, 12,791 were homicide, 220 were undetermined and 360 by “legal intervention” (i.e. the authorities).
In the same year the CDC said 43,664 were killed in car accidents, 37,286 died from poisoning and 20,823 died from un-intentioned falls. In 2009, the CDC said that of the 16,799 homicides, 11,493 were by shooting. So guns haven’t lost the appeal as the murder weapon of choice, or the best way to leave this life if you are a troubled soul.