Saturday, May 16, 2009

Quick Trend Comments Before the Day Starts

RE: Comments on the previous post, I too am extremely glad to see Ruger in the AR market, because, as noted, it marks the final "mainstreaming" of black rifles. They dropped their SR556 precisely where I would have dropped a gun if I was a manufacturer — into the upper levels of the market. There's no money to be made on "commodity" products, products sold purely on low pricing, whether computers, flowers or guns.

Secondly, experience has shown that the upper end of the market takes less of a battering when a sales bubble bursts, as this one will. One of my primary topics of conversation yesterday with industry leaders, especially on the black rifle side of the market, was a frank discussion of how much longer this sales cycle is likely to run, what the implications of a normalization of sales was going to be and how much discretionary income has been leached out of the shooting market by this cycle. I can't go into all the discussions, because a lot of the shared information is proprietary, but there's a general feeling — maybe not strong enough to call a consensus yet — that the market has peaked and maybe begun to cool a bit in recent days.  In the absence of another pronouncement by Sock Puppet General Eric Holder that all guns in private hands should be seized and sent to Mexico, the market will exhale.

There is also a similar feeling that the bulging middle of the AR market is close to a saturation point. That is, most of the new shooters or panic buyers are already in. The implication of this for manufacturers is that a percentage of the currently huge backorders for black rifles will disappear as retailers see see the demand slackening.

Conversely, the manufacturers see (and predict they will continue to see) heavy demand for the upper tier of products — .308/7.62 black rifles, gas piston "upgrades," specialized rifles for target shooting and hunting and "super-premium" and/or factory custom rifles. Essentially, some of the new buyers, now that they have a little experience with their guns, will be "buying up" now that they know what they actually want. Additionally, the more experienced AR consumers, who have for the most part sat out this dance, will be moving back into the market as it normalizes.

There are obviously satellite trends — the anticipated boomlet in the accessory market; the anticipated growth in sales of fully finished uppers as a portion of the staggering number of stripped lower receivers that have been sold in the last 6 months start to be built out, etc.

That's where I am now on trends. I'll talk a little later about ammo...and I don;t have anything good to say at all...


nj_larry said...

MB said:There's no money to be made on "commodity" products, products sold purely on low pricing, whether computers, flowers or guns.Not to be argumentative but you got to be kidding aren't you? Your betting on another .223 boomer? And it's NOT a commodity? Most buyers don't know the difference between the muzzle and a hole in the ground. A commodity is a product that has little or no way to differentiate it by supplier. That just about describes "ARs". Period, full stop. you want to check out the size of 1-800-Flowers (1 BILLION) or a half dozen PC or chip manufactuers (each bigger than the entire US firearms market combined)?

Secondly, you admit that the "bubble" is about to end and their is no ammo for it available, and NOW they "drop" the product on the market (lord only knows when volume shipment will start) ? That is exactly what a company needs ! Perfect timing...How about a sub prime loan or I've got a great stock for you...Brilliant analysis MB !!!

Remember that Ruger is a publicly traded company. They have a fiduciary and legal responsibility to their stock holders. If I owned their stock I would be questioning the sanity of their Board to let something like this happen. I hope their next SEC filing has a better explanation ...

Anonymous said...

Uh, upper tier products hold up well in economic bad times huh? Tell that to Browning and Beretta who are having a damn hard time moving O/U shotguns at the moment. And serious clay shooters tend to come from people who have more disposable income than the average joe.

My sense is the run on guns & ammo has played its course.

Ammo may lag the gun sales but at some point the boom will abruptly end for ammo as well.

Anonymous said...

Interesting analysis. I am looking forward to hearing MB's promised thoughts on ammo trends.

Joe said...

I have to agree that I think the bubble is on the down side unless the current administration makes any more stupid comments. I am seeing more companies have AR magazines in stock and AR receivers as well.

Geoff aka Pathfinder said...

Local Mom & Pop gun shop in Fargo has a full rack of ARs, and half a rack of AKs. Even an HK 91 - a real one.

Mills had an AK (WASR-10) on Friday 5/15/09 for $469.

Yeah, I think the bubble is collapsing too.

O/U shotguns, hunting rifles, anything that ain't black and tacticool have been a very quiet market for almost a year now.

epnurse said...

What are they saying about ammo? I want to hear forecasting from ammo manufacturers and importers. Selling new rifles is great and all, but they need to be fed!

hillbilly said...

Of course, there's something all of y'all are completely discounting, or at least not paying attention to in these comments.

All of this "end of the bubble" stuff is predicated on bHo's minions keeping their mouths shut about more gun control.

Have none of y'all seen Carolyn McCarthy on the various networks promising, promising, crossing her-heart-and-hoping-to-die promising to REINTRODUCE the Assault Weapons Ban in Congress?

And when she does that, what do you think happens to gun sales?

The end of the bubble is completely dependent on the rocket surgeons and brain scientists in bHo's administration keeping their yaps shut.

Has anyone seen anything at all to indicate they are capable of doing so?

EJ said...

Frankly, when you accept that we are no longer excited by computers, high def tvs, Suvs, etc., and there are no real new and interesting "must have" items in the consumer realm, why wouldn't the interest turn to the gun market?

Bane and Company are not rolling out all these new tv shows because the market has peaked. Instead, he is increasing the size of it bu getting information to consumers who knew very little of the product line called "self-defense".

Has the need for self defense also peaked? I think not.

Handguns, Rifles, Shotguns. They will all ride the growth of the self defense industry.