Ruger shoots to sell a million guns in a year

The partisan political climate appears to have boosted sales at Sturm, Ruger & Company, which is trying to boost inventory as the country nears the next presidential elections.When asked in a conference call about President Barack Obama’s potential re-election, CEO Michael Fifer quipped, “I think half the people in the firearms industry, if asked, would hope he’s not president, but then will secretly go out and vote for him again.”And why not? The conservative firestorm he has inspired has caused guns to fly off the shelves.Sturm, Ruger – based in Connecticut but with substantial operations near Newport – had only good news to report last week on the second quarter, which ended July 2. The company posted net earnings of $10.8 million, or 57 cents per share, bringing the total for the year to $18.8 million. Both totals are running $2 million more than last year. Meanwhile, the company reported nearly $80 million of sales for the quarter and $155 million for the year. All this means a stockholders’ dividend of 14.2 cents per share.But that doesn’t mean inventory is piling up. Sales have been brisk. The estimated sell-through of the company’s products is up 24 percent, and background checks have been up 13 percent. The income order rate for the second quarter was nearly double that of 2010.All this is good news for the National Rifle Association and the candidates it supports. Sturm, Ruger is shooting to sell a million guns from April 2011 through March 2012, and for every gun sold, the NRA will get a buck. Last month, Ruger donated $279,600 as part of that challenge.”No company in history, to the best of our knowledge, has ever built and shipped one million firearms in one year. We would like to be the first, and we’ve launched a promotional program to get the consumers behind us for this ambitious program,” Fifer said.To do so, the company has been trying “inventory in advance of the 2012 distributor show season and the coming presidential election year, when we anticipate strong demand,” said Fifer, who said that inventory could go up as high as $25 million. “Ruger certainly had too much inventory in the past, but probably does not have enough now.”The most popular gun has been the company’s new SR1911. That is the one, he said, that “they are screaming and crying the loudest for, but frankly, I’m unlikely to increase capacity.” That’s because the gun probably has the lowest return on capital investor. “And so, I’m reluctant to do more, so I think they’re just going to have to keep suffering and get them when they can.”The company does have the wherewithal to boost production, however. At the end of the quarter, cash, equivalents and short-term investments totaled $76.5 million. And stockholders’ equity was $128 million, equating to a book value of $6.81 per share. This led some analysts to ask whether the company was going to go shopping. It did purchase a majority stake in a pepper spray company in Canada, but, said Fifer, in the case of gun manufacturers, “prices are outrageously high….it’s really goofy out there.”And it doesn’t look like Ruger will make a run at defense or police contracts either.”Those are high cost to get in the game, very low odds of winning, and if you do win, you probably didn’t make any money,” summed up Fifer. “And so, therefore, we’ll take any that accidentally comes our way, but we’re not making a major effort to get it.”So look for that ramp-up to be internal and focused on personal sales. The problem, however, isn’t lack of cash, but difficulty of getting substantial output during the summer, especially in New Hampshire, where veteran workers have a lot of vacation time and “where, frankly, they don’t want to take any time off the first quarter, or during mud season, they really want to take it off in the summer. So, I said we’ll do our best to level load and build inventory, but it’ll be a challenge.” –BOB SANDERS/NEW HAMPSHIRE BUSINESS REVIEW