Business

Four trends are shaping the gun industry

  • The arms industry is bouncing back after hitting a record-breaking sales streak during the pandemic.
  • Top manufacturers have had to scale back production and lower prices to protect their profits.
  • Many in the industry are turning to newer guns and better marketing strategies to win over consumers.

People fire an array of guns at the annual Machine Gun Shoot sponsored by Shooters Gauntlet on June 3, 2023 in Monroe, Pennsylvania. The shooting, which has been taking place since 2016, allows gun enthusiasts and others to machine gun fire at targets in a controlled and safe, wooded location.

Spencer Platt | Getty Images

The arms industry is bouncing back after a post-pandemic sales slump forced some of the largest manufacturers to scale back production.

According to FBI data analyzed by gun monitoring site The Trace, Americans bought an estimated 1.19 million guns in July, down 17% from the previous July.

Despite fewer firearms being sold in the United States, the business is still profitable as manufacturers adapt to changing consumer demand, develop a new generation of guns, and employ marketing strategies that increasingly resonate with younger, more diverse consumers.

On the other hand, the declines stabilized at arms manufacturers such as Smith & Wesson and Sturm, Ruger & Company. Smith & Wesson shares are up about 40% so far this year, while Sturm, Ruger is up 2%.

They reassure investors that their business models have survived the downturn and that some positive trends will help the industry to rebound.

Here are four trends shaping the gun industry today:

Several companies in the gun market are cutting back production and lowering prices as they struggle with rising material costs and falling demand for their guns.

During the pandemic, more Americans than ever were buying firearms. According to trade group National Shooting Sports Foundation, new gun ownership shares hit a record 21 million in 2020, at the height of the sales boom. NSSF uses FBI data and background checks to estimate new gun ownership rates.

By 2022, however, the feelings of insecurity and instability that many Americans felt during the pandemic had subsided, and with it the surge in firearm sales. Gun purchases fell to 16.4 million this year, more in line with pre-pandemic numbers.

“The industry has bottomed out and stabilized,” Rommel Dionisio, an analyst at Aegis Capital, told CNBC.

Smith & Wesson, the nation’s largest firearms maker by revenue, reported fourth-quarter net sales of $144.8 million, down 20% from the year-ago quarter.

In a conference call with investors, CEO Mark Smith said the company is “adjusting production rates to align with normalizing demand patterns.” Smith added that “targeted consumer advertising” has helped the company maintain its leading market share and secure profits.

In its most recent earnings report, Sturm, Ruger & Company reported flat sales for the second quarter as demand for some of its most popular product categories, such as polymer pistols, slacked.

However, the company’s second-quarter results, while down year-on-year, improved from the first quarter.

CEO Christopher J. Killoy said the company will “continue to adjust our production levels and product mix to better align our production with current and anticipated consumer demand.”

“It’s not really downhill from here,” said Dionisio of Aegis Capital. The industry could even start ramping up production, if at all, if there’s another surge in demand from the 2024 presidential election. Arms sales typically spike during presidential elections, Dionisio added.

The next generation of firearms seems to be on the horizon: lightweight, inexpensive guns that have advanced technology and some safety features.

Weapons startups like Biofire Technologies are leading the way with their 9mm handgun that uses facial recognition and fingerprint verification technology to operate. CEO and founder Kai Kloepfer said the smart gun, which is first to emerge after years of failed attempts by other companies, could help reduce accidental gunshots and suicides.

“When you pick up the gun, it unlocks with either your fingerprint or your face, so only an authorized user can fire it,” Kloepfer told CNBC.

Kloepfer said thousands had already pre-ordered online, with some models selling out. Biofire said it couldn’t share details on the volumes produced because it was “a little competitively sensitive”.

Their guns range in price from $1,499 to $1,899. When they ship in December, they will be the first smart guns to enter circulation in the US. Biofire’s investors include venture capitalist Ron Conway and Peter Thiel’s Founders Fund

Biofire’s smart gun comes at a time when gun manufacturers are increasingly looking to different materials and technologies to make their products more appealing to consumers.

Mark Oliva, an executive at the National Shooting Sports Foundation, said red dot sights have become a popular accessory with consumers in recent years.

An alternative to the more traditional iron sight, which requires the shooter to look through an optical telescope to aim, red dot sights project a small light directly onto a target.

“My eyesight isn’t getting any better,” Oliva said, “so I’m one of those people who switched to using a red dot sight on my pistol.”

Oliva also said the industry is shifting to lighter materials like polymer to make slimmer, more durable weapons that are cheaper than metal or steel alternatives. Today, Oliva said, polymer can be found in every type of modern firearm, including those made by startup Biofire.

The non-profit anti-gun violence organization Everytown for Gun Safety sees the positive potential of smart guns.

“Smart guns can ensure that guns are only accessible to their owners and no one else,” said Nick Suplina, Everytown’s senior vice president of law and policy, who tested Biofire’s smart gun. “Weapons manufacturers now have a viable roadmap for safety innovation – and it’s up to them to act.”

The firearms sales boom during the pandemic has shown that the face of gun ownership in the US is changing.

Of the 7.5 million Americans who bought guns for the first time between January 2019 and April 2021, half were female, one-fifth were black and another fifth were Hispanic, according to a study by Matthew Miller, professor of public health and epidemiology at the University of Washington, DC Northeast.

In contrast, according to the study, 63% of gun owners overall are male and 73% are white.

Another study by NORC at the University of Chicago found similar trends.

According to the study, first-time gun buyers during the pandemic were younger than previous US gun owners before the pandemic.

86 percent of first-time gun buyers during the pandemic were under the age of 45. Before the pandemic, 41 percent of all gun owners were under the age of 45, according to NORC. The group began tracking this data in March 2020.

“The notion that gun owners are just old, male and pale doesn’t hold true,” the NSSF’s Oliva told CNBC. “Today’s gun buyers are more representative of America.”

For gun owners, personal protection is increasingly the number one reason for purchasing a firearm.

According to a 2023 Pew Research Center poll, nearly three-quarters of US gun owners cited protection as the top reason for owning a gun, more than any other factor.

The survey found that respondents cited other factors, such as hunting and sport shooting, at 30% and 32%, respectively.

In 2017, when the survey was last conducted, 67% of respondents cited protection as the top reason for owning a firearm.

According to a 2020 survey by online trade journal Palgrave Communications, this increase is consistent with how gun culture has evolved over the past few decades.

Many manufacturers, particularly in light of the social unrest in the United States in recent years, have moved away from hunting and recreational themes when advertising their guns and instead turned to personal protection and self-defense to reach consumers.

“While we recognize that diverse gun subcultures continue to exist in the United States, these changes suggest that self-defense has become core to American gun culture today,” the study authors said. “With this shift, previously dominant subcultures like hunting and recreational shooting have been marginalized.”

This is also in line with the increasing popularity of the weapon types. Oliva said he’s observed gun buyers being drawn to handguns like semi-automatic pistols or “Glocks,” which are more compact, easily concealed and designed for self-defense.

Source: www.cnbc.com

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Robert Wilson

Business & economics analyst. Breaking down intricate financial trends for informed decision-making.

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