NEW YORK (Reuters Breakingviews) - The National Rifle Association isn’t known for the subtlety of its messaging. But in recent months, the leading shill for America’s gun industry is sounding shriller than ever. That’s despite unprecedented support from Donald Trump, the first U.S. president to speak at its annual meeting in a generation. “You came through for me, and I am going to come through for you,” the commander-in-chief told the NRA’s top brass and members in Atlanta in April. “The eight-year assault on your Second Amendment freedoms has come to a crashing end.”
But something else has come to an end with Trump’s election: a bull market for the gun industry. Distress is evident across the sector, from the profit warnings of gunsmiths to the sliding stock prices and bankruptcies of outdoor retailers.
(See Breakingviews graphic: Trump pops the gun bubble)
Trump is arguably the most NRA-friendly occupant of the Oval Office in decades. But that’s exactly the problem. His arrival precipitated a sharp slowdown in firearms sales, which had been on a tear since the United States elected Democrat Barack Obama as its first African-American president in 2008.
Christopher Killoy, chief executive of gunmaker Sturm Ruger, summarized the thinking when explaining his company’s 44 percent slide in EBITDA last quarter. “We just have to encourage our customer base to get back out to the range, blowing up some ammo, enjoy the sport and get back into the store ... to start buying a few more guns for fun, not just because you think they might be banned in the future.”
In other words, firearms buyers no longer fear the government anti-gun bogeyman, and it is hurting those in the business of selling weapons. The FBI says there were nearly 1.6 million fewer background checks conducted in the first eight months of 2017 than in the same period last year.
That still implies more guns have been sold already this year than in all of 2010. The neo-Nazi rallies in Charlottesville, Virginia last month and the associated violence may have provided at least a temporary boost, too – there were 4 percent more background checks in August than in the same month last year. But it’s nonetheless a calamity for America’s consumer-armaments complex.
Take last week's quarterly earnings report from American Outdoor Brands. The Springfield, Massachusetts-based gunsmith used to be called Smith & Wesson. The company changed its name in January and started diversifying away from guns into other accoutrements of rugged outdoor pastimes. It recently acquired Bubba Blade, for instance, which makes knives for filleting fish.
What really stuck out in American Outdoor Brands’ numbers was its sharp financial decline. The company went from a $35 million profit a year ago to a $2 million loss in the three months to July. Sales plunged 38 percent. The balance sheet deteriorated, too. Cash fell from the preceding quarter by a third to $43 million, while total debt rose 11 percent to $240 million.
Investors were cautious about the largest publicly traded gun manufacturer's prospects even before its latest results. They had, after all, seen Dick's Sporting Goods lose a fifth of its value in August because of what it called "irrational" discounting of hunting supplies. Dick's retailing rival Gander Mountain declared bankruptcy in May, flooding the market with an inventory of guns.
Yet share owners in Smith & Wesson’s parent were still shocked. They sent the stock down to nearer where they traded before the Sandy Hook Elementary School shooting in December 2012 supercharged gun sales. The company’s value is now half what it was the day before Hillary Clinton, who supported restrictions on gun ownership, lost the presidential election in November.
The winner, Trump, isn’t helping the NRA’s arms-producing backers, whose generous donations account for a chunk of the nonprofit’s annual revenue, which hit $337 million in 2015 – the last year for which its tax returns are publicly available on GuideStar. But the NRA is taking a page or two from the candidate’s playbook in creating an enemy to rally support: the media.
In a series of recent videos, NRA spokespeople snarl into the camera. "They use their media to assassinate real news," growls journalism-school dropout Dana Loesch, before cutting to an image of the New York Times headquarters in Manhattan. "You weaponized the First Amendment against the Second," fulminates NRA chief Wayne LaPierre. "Your claim to the truth is as legitimate as a thief's."
Such melodrama ought to be unnecessary given that LaPierre has a standing invitation to the White House and the Republican House and Senate majorities are stacked with NRA-friendly legislators. But it is a symptom of the gun industry’s failure to garner support much beyond the one-third or so of American households who own guns, many of whom have been stockpiling weapons during the Obama years.
LaPierre, whose wife Trump appointed to the board of the charitable arm of the National Park Service, is pushing legislation as well as rhetoric. The NRA’s agenda includes draft laws that would, among other things, make it easier to carry concealed weapons on some 12 million acres of federal land – and perhaps in all 50 states.
One measure calls for the easing of restrictions on gun silencers and suppressors, including getting rid of a $200 tax. It would also bar states from imposing their own regulations or levies on silencers. Billed as a “hearing protection” provision, the relaxation of rules on equipment that’s more suited to Mossad agents than moose hunters was this week dropped into a wider House bill called the Sportsmen’s Heritage and Recreational Enhancement Act.
This kind of legislative legerdemain is one way the NRA can keep trying to help its hardware-producing backers boost their top lines even if actual firearms aren’t flying out of stores. Not convinced? Take another look at American Outdoor Brands’ recent results. In July the company agreed to buy Gemini Technologies, known as Gemtech, a provider of “world class silencers” and related products to consumers, law-enforcement entities and the military.
Reuters Breakingviews is the world's leading source of agenda-setting financial insight. As the Reuters brand for financial commentary, we dissect the big business and economic stories as they break around the world every day. A global team of about 30 correspondents in New York, London, Hong Kong and other major cities provides expert analysis in real time.
Sign up for a free trial of our full service at https://www.breakingviews.com/trial and follow us on Twitter @Breakingviews and at www.breakingviews.com. All opinions expressed are those of the authors.