Sturm, Ruger sees 50% surge in third-quarter gun sales
Company reports strain on production even as it gets set to add newly acquired Remington Arms line
Sturm, Ruger & Co. is starting to run out of guns, thanks to an “incredible surge in demand” in the third quarter, coupled with a Covid-induced caution in hiring, CEO Christopher J. Killoy told analysts in an Oct. 29 earnings call.
That increased demand – which Killoy attributed to “civil unrest” and not the run-up to the election – is about to be augmented, as Ruger starts to produce Marlin firearms, which it acquired for $30 million at the end of September as part of Remington Arms’ bankruptcy . He said a good portion of the Marlins will probably be produced at Ruger’s Newport facility.
Ruger’s gun sales picked up by more than 50% in the third quarter, which is actually below the 68% increase for the industry as a whole, according to national background check data.
In terms of dollars, the company’s firearm sales increased to $145.7 million for the quarter, a 53% increase from the third quarter of 2019, and net earnings went up to $24.8 million ($1.42 a share), about five times what they were a year ago. That brings year-to-date revenue just short of $400 million and puts profits at 58.7 million.
For shareholders that’s good news, since dividends are directly tied to earnings per share. That means they’ll get a 56-cent per-share dividend this quarter, as compared to 14 cents a year ago.
Kilroy credited the surge in sales to “protest, demonstration and civil unrest in many cities” leading to “concerns about personal protection,” though some of that could be coming from the social and economic upheavals due to the pandemic. He did not mention the particularly volatile presidential election – which in recent history has sparked an increase in gun sales.
Kilroy also said the industry might be benefiting from people being stuck at home as “new buyers return to getting outside with your friends and family to shoot while you can still social distance.”
The company only started rehiring workers in June because of fear that the virus would jeopardize their health. The company increased its headcount by 140 employees over the third quarter, to roughly 1,750, though individual headcounts for the Newport plant and the facilities in North Carolina and Arizona were not provided. The company was able to increase production by 15%, the company said, nevertheless “as a result of this unprecedented demand, inventories remained significantly reduced at all levels in the channel during the third quarter,” he said.
Put in numbers, the company had a backlog of close to 1.27 million guns at the end of last quarter. A year ago, the backlog was at 161,500.
This isn’t just the situation at Ruger, said Killoy.
“Most firearms brands have been cleaned out at all levels of the channel,” he said, adding, “we’ve never quite seen the level of inventory depletion within the entire channel. Whether it’s Ruger warehouses or distributor warehouses or the shelves at your local retailer, there’s not a lot of inventory out there right now, especially in the key product families. So I think it’s fundamentally stronger and different than I’ve seen in my three decades in the business.”
There is going to be even more of a strain on demand when Ruger takes Marlin production. Kilroy said the company expects to close the deal this quarter.
The Marlin product line was produced at Remington plants in New York, Alabama and Lexington, but Ruger plans to move all that to its facilities.
When asked which ones, Killoy said, “It’s going to be split between at least two Ruger facilities, potentially all three, but I think it’s more likely to be split between the Mayodan, N.C., facility and the Newport, NH, facility, but that still remains to be seen.”