Friday, December 04, 2009

More Signs That the Bubble is Thoroughly Popped

S&W takes a beating on Wall Street today...from Barrons:
The gun maker Smith & Wesson (SWHC) said its sales outlook for the next quarter would be far off target.

The company said after the close of trading yesterday that for its fiscal third quarter, ending in January 2010, it expects sales of $90 million to $95 million, significantly below the average analyst estimate of $105 million, according to Thomson Reuters.

Not surprisingly, investors promptly fired back, dumping shares en masse.

The stock plunged 16% to $4.41 on the news as volume topped eight million shares, more than five times the average daily trading volume during the past three months.

23 comments:

ericire12 said...

I told ya it was over!

Dave S. said...

This is the part where shooters start talking about the "great deals" they got from desperate dealers, after complaining about the "gouging" they suffered last year when the price was higher.

See, when demand is high, a dealer who profits from my sale more than normal is a "gouger"; when demand is low, the lesser profit or loss he suffers from selling a gun to me is a "bargain."

Anonymous said...

And after the bubble pops, S&W has:
1. A bunch of products that their competitors do better and cheaper.
2. MSRPs that have no relation to actual market value.
3. Their few unique products have features that enthusiasts dislike (coughlockcough)

I call it a case of GM-itis, only there won't be any bailout.

Anonymous said...

Meanwhile, Ruger makes the .44 Special a regular catalog item. Yippee!

dam doc said...

Glad I waited on that Noveske stainless upper... maybe it will be "bargain proced" soon!

Anonymous said...

I wonder what the sales forcast details are for their various "divisions", a. k. a.: the T-C part of their business. I still can't understand why they bought that line. I also can't understand why they continue to field products that are outside of their expertise, a. k. a.: long-guns.
Life Member

Anonymous said...

Locally, J frames have been available for a while now. Ruger LCR's are also starting to show up on dealer shelves regularly.

Glocks still seem to be in tight supply as well as a Kahrs. The Kel Tec 380's and the Ruger knock off also seem to be in short supply.

Anonymous said...

J frames have been available locally for quite a while. Ruger LCR's are showing up on dealer shelves as well.

Glocks, Kahrs, Kel Tec 380s (and the Ruger knock-off) all seem to be in short supply.

Anonymous said...

To answer anonymous at 8:26
The reason S&W bought T/C was because T/C has a reputation for making outstanding rifle barrels at the time S&W was bringing out the M&P rifle, and T/C was located between the plants in Springfield and Houlton Me.

To reply to Anonymous at 9:50
It must be a local thing because here in the NH lakes region Glocks are as plentiful as dog poo while I still have not seen a Ruger LCR although the local dealer did have 2 LCP's.

Tom Bogan

SARDUDE said...

Hmmmm.... maybe that plan of all but giving away their M&P line to large Agencies across the country for the advertising value is not paying off?!
The budget hounds loved it, but the troops not so much!
I love the J frame, but still rue the day we traded out for the M&P pistol and AR! :(

Anonymous said...

Thanks for the direct reply Tom at 11:54 A. M.
I know about the barrel strategy rationale, but TC wasn't already making any AR barrels, so they had to tool-up. Tooling up to satisfy "bubble demand" isn't a good strategy, especially when S&W could buy other ggod barrels from good manufacturers, that were already tooled-up. I don't think that barrels are the production constraint for most makers, even under the "bubble".
I think that the expanding TC line of cenrerfire rifles may have cost too much and they were expanding into a saturated market. I don't think that they got the return there.
The bottom line? Lower sales forcast and investment debt that probably won't get paid off as fast as forecast. I know that I sound like a "Monday morning quarterback", but I wrote these same observations, as the deals were going down. I think that I'll mosey over to the S&W 'site and review their financial reports. Maybe I'll have more stuff to talk about later.
I like S&W and most of their products. I own an adequate amount of them too and love some of them. I also want them to succeed.
Life Member

Indrid Cold said...

At 1K per revolver, is it a wonder that sales are slow? And with everyone and their sisters-in-law making ARs, is it surprising that competition is tough? I've bought SIGs and I've bought Tauruses--that is, I appreciate quality, but avidly search out a good deal too. Let's face it, S&W wheelguns are expensive, but wouldn't have to come down THAT much to be in line with reason. So I'm wondering whether their prices will relent next year.

Anonymous said...

Anonymous at 4:36
Retooling ? You don't know the HALF of it ;D
The first thing S&W did was replace all the machines, this meant that NO ONE was familiar with the new equipment, the scrap rate quadrupled.
The main reason that S&W stocks are down is because in this type of market T/C is a money pit. When people are buying AR's and AK's as fast as they can be made they are not going to spend money on single shots or Black powder, this is also why T/C is expanding into the bolt action market.
Tom Bogan

Lawrence said...

why couldnt they market a less expensive version of the J frame for folks who cant afford $400 for one?

They could knock a chunk out of the taurus market share if they did that.

Im fortunate in that I could afford a little less than $500 for my 642 but some people couldnt. If they made an entry level J frame with a basic finish I'd buy one for a backup or to stash away in my hiding place in my office safe. I'd certainly love to be able to afford a J frame snubby for both floors of my house, one to leave at my grannies house and one to leave in the lockbox in my car trunk.

APismoClam said...

I'd buy another couple of Model 29 .44 Mags in a heart-beat from them if they would:

a) take the F%$iggin lock out.

and

b) put the firing pin on the hammer (hammer nose) again.

and

c) used forged hammers/triggers/internal parts again

I know that none of the above is going to happen anytime soon, so it's shopping at Gunbroker for me!

Middle Man said...

S&W is run by ex-hardware and softdrink executives that don't listen to their territory sales people and middle managers. The "gun people" have lost institutional control in Springfield; while the non-gun executives are pushing the business to act like the consumer goods business model they know from their past.

Recall all the firearms manufacturers that wanted to follow the Harley model? How's that working our for S&W? Check Jim Shepard's critique of that in the Shooting Wire last week...spot on.

T/C was an albatross of a bad deal that was written off financially when sales were red hot two quarters ago. It's up for sale (my hunch) with no takers...yet. S&W will get desperate soon and the sale will have shades of Mercedes dumping Chrysler. Meanwhile, S&W's wholesale pricing strategy will continue to be a two ton anchor slowly dragging the ship down.

Ruger changed their strategy (and production methodology) about three years ago and has enjoyed tremendous success in spite of some serious product recalls. They have also succeeded without whoring themselves out for tax-payer funded contracts.

Ruger is Ford and S&W is GM

EJ said...

S&W has outperformed Ruger over the last five years....GM it is not. Profit went from -1 cent to 31 cents.

http://finance.yahoo.com/q/bc?s=SWHC&t=5y&l=on&z=m&q=l&c=rgr

Amazingly it is not the 74.8 % gross profit that is being discussed. It is the analysts forecasts that are 5% higher than the company expects for the next quarter.

EJ said...

Make that 21 cents...fat fingers.

Anonymous said...

EJ Said...

+1!

S&W had a great year with increase in sales and profit. Just not as big as some MBA analyst thought he could have made if he was running the show. So he down grades the stock from buy to nuetral. The company made money and your not happy in 09?

These are the same MBA's that when a company "only" loses $70 million they list it as a buy. Idiots IMHO.

Sales are slowing because the economy is slowing and folks do not have the extra income to burn.

If Holder and BO push an AWB it will pick right back up.

Ratcatcher55

KM200 said...

APismoClam - On the lock we are in agreement. I hate the stupid thing and won't buy a S&W with one.
The other things though, firing pin on hammer, forged triggers, etc. I'm not so sure.

I have both versions of 44's. The only difference is the newer one shoots much tighter groups and seems to have less wear points.
Both have had trigger jobs done by a pro. The newer style gun is every bit as functional as the older one. Did I mention it shoots better?

Middle Man said...

I suppose that if you did not purchase any SWHC stock in 2006 or 2007 you'd be very happy and pleased with their performance. And I suppose you're moderately pleased with it's performance since mid to late 2008 when it was trading at 2-ish dollars...

Check the SEC filings from 2007 and read exactly how many executives cashed out their shares and bailed knowing all too well that the stock was vastly over valued and ready to drop like a stone.

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