Sturm Ruger sales soar in 2Q
Sturm Ruger & Co. sold nearly $120 million firearms, up by half compared to the second quarter of 2011.
Sturm Ruger & Co. was getting so many gun orders that it couldn't build them fast enough last quarter, and its quarterly numbers reflect that. Even after suspending orders for the first two-thirds of the quarter ending June 30, the Connecticut-based gun manufacturer -- with its major production operation in Newport -- sold nearly $120 million of firearms, up by half compared to the second quarter of 2011. That translates into $18 million in quarterly profit (or 94 cents a share), up from $10.8 million in the comparative quarter, and a nifty 32.4 cents a share dividend. For the half, the company posted revenues of $232 million (up from $153 million the prior year) and profits of $33.5 million, or $1.75 a share (compared to $18.8 million, or $1 per share.)
"In both the second quarter and the first half of 2012, our earnings growth exceeded our sales growth, and we're very proud of that," said Sturm Ruger CEO Michael Fifer in a conference call after the earnings release at the start of the month.
The company's surge of demand exceeded that of the national rate, which grew despite -- or perhaps because of -- the recent spate of high-profile shooting incidents and perhaps fueled by a president unpopular with gun owners. According to national background check data, gun sales went up by about a fifth nationwide for both the quarter and the half. However, Ruger's sales increased by more than half during the same period. The company attributes its growth to new products introduced during the first half of the year: Ruger American Rifle, SR22 pistol, the 10/22 Takedown Rifle and the 22/45 Lite pistol.
"More than one-third of our year-to-date sales were products that did not exist two years ago. This is a great achievement for our engineers, and another testament to the importance of new product development," Fifer said. These are the problems lots of companies would like to have, but they do create problems nonetheless. The company -- which has a policy of non-cancelable orders -- didn't want to take orders it couldn't fill, so it suspended new orders from March 21 (the last 10 days of Q1) to May 29 (the first two months of Q2). Despite this, the company received 10 percent more orders in its second quarter than the second quarter of 2011.
The company upped its capital production to stamp out more guns, but it still had a backlog of more than a million guns at the end of the quarter, down by 150,000 compared to the previous quarter, but more than triple what it was at midyear in 2011. Similar inventory was down to an uncomfortable 78,400 firearms; with all but 10,000 of those guns already out to distributors. Again, that's better than 70,000-gun inventory at the end of the first quarter, but below the 152,000-gun inventory at the end of last year.
"Our goal is to replenish -- let me say this, our long-term goal -- is to replenish our finished goods inventory in future periods to levels that would better serve our customers," said Fifer. "This replenishment could increase the value of finished goods inventory by as much as $15 million from the current level. But, try as we might, I don't think it will happen too soon.
"The company has enough cash on hand to increase production - some $96 million in cash equivalents at the end of the half, some $20 million more than it had at its beginning. The difficulty is in attracting enough workers, particularly engineers, who are having trouble selling their homes to move to Newport, or the company's other facility in Arizona. “We’re always looking for good mechanical engineers who happen to love guns," Fifer said.Edit ModuleShow Tags