Smith & Wesson raises full-year forecast, shares jump

Thu Sep 6, 2012 7:19pm EDT

(Reuters) - Gunmaker Smith & Wesson Holding Corp (SWHC.O) raised its full-year sales forecast as it expects to continue tapping into the growing demand for guns in the United States and boosting production capacity.

Smith & Wesson shares, which have doubled in value this year, rose 21 percent to $10.85 in extended trading. They closed at $9.00 on the Nasdaq on Thursday.

Demand for firearms has risen phenomenally, driven by fears of severe gun laws that may arise if U.S. President Barack Obama wins another term in the impending November elections.

Some analysts, however, said demand for guns could have peaked and will possibly moderate after the U.S. presidential elections.

The company said on Thursday that it will remain focused on its core firearms business as it continues to see opportunities for revenue increases and cost reductions beyond fiscal 2013.

Smith & Wesson has been trying to channel focus on its core firearms business over the past few quarters. It said last October that it will divest the perimeter security business. The sale was completed in June.

The company also said on Thursday that it will intensify capacity expansion and expects to spend between $30 million and $35 million in 2013.

It has the ability to deliver gross margins between 38 percent and 40 percent over time, the company said.

Gross margin rose to 37.7 percent for the first-quarter, from 28.9 percent a year earlier.

TAKING AIM

An increase in social acceptance has led Smith & Wesson to expect to add more women buyers and younger customers.

The 160-year-old company said it will continue to add new products, cut costs and will prep up marketing and advertising activities to increase visibility among consumers and grab market share.

"As we come into Christmas ... there is a lot of consumer purchase activity," Chief Executive James Debney said on a conference call with analysts. "We want to be in the forefront of the consumer's mind."

Springfield, Massachusetts-based Smith & Wesson forecast current-quarter sales to grow about 40 percent to between $130 million and $135 million.

Analysts on average were expecting sales of $119 million, according to Thomson Reuters I/B/E/S.

The company said it will see a lesser impact from a seasonally slower second quarter as an increase in manufacturing capacity offsets fewer production days due to its annual two-week August shutdown.

It now expects sales between $530 million and $540 million for fiscal 2013, up from its earlier forecast of between $485 million and $505 million. Analysts' estimated sales of $498.2 million.

The company earned 28 cents per share on revenue of $136 million for the quarter ended July 31, beating market estimates of a profit of 18 cents per share.

Rival Sturm Ruger and Co Inc (RGR.N) reported better second-quarter results last month on a momentum in demand for its new rifles and pistols.

(Reporting by Arpita Mukherjee in Bangalore; Editing by Maju Samuel)

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