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NEWPORT, NH — Fear is good for business.
That’s the takeaway in the latest earnings report for Newport gun manufacturer Sturm, Ruger & Co., which last week reported that gun sales and profits surged, especially during the second quarter, as the result of people’s safety concerns arising from the COVID-19 pandemic and — in the company’s words — “civil unrest in many cities throughout the United States.”
It has long been a truism in the firearms industry that sales increase when gun owners are worried that lawmakers may restrict access to firearms. During the Obama administration, for example, periodic calls for gun-control legislation in the wake of mass school shootings helped to fuel gun sales.
But once President Donald Trump came into office in 2017, gun sales slowed — so much so that Ruger let go of 580 employees over the first three years of Trump’s presidency by the time it ended 2019 with a more than 17 percent slump in sales. The firearms industry even dubbed it the “Trump Slump,” despite enjoying the unabashed support of a solidly pro-gun rights president in the White House.
Now, as COVID-19 plunged the U.S. economy — and much of the world — into its severest contraction in modern recorded history and at times violent protests in American cities broke out in response to racial injustice, Ruger saw its second-quarter sales surge $34 million, or 36 percent, to $129.4 million, the company reported on Wednesday.
“The incredible surge in demand outstripped our production capability during the second quarter,” Christopher Killoy, Ruger’s chief executive, said in a conference call with financial analysts on Thursday. Killoy, who has worked in the firearms industry for 30 years and like other Ruger executives typically gives a dry presentation, alternately described the surge as “staggering,” “incredible” and “probably the strongest level of demand that I’ve seen.”
Killoy was direct in explaining what Ruger sees as the reason behind the exceptional gun sales: “This increased demand appears to be driven, in part, by concerns about personal protection and home defense stemming from the continuing COVID-19 pandemic; protests, demonstrations and civil unrest in many cities throughout the United States; and the call, by some, for the reduction in funding and authority of various law enforcement organizations.”
Indeed, gun sales have been so strong that Ruger couldn’t make guns fast enough, according to Killoy.
“The incredible surge in demand outstripped our production capability during the second quarter,” Killoy said, noting that inventory at Ruger’s warehouses and among its distributors decreased by 127,000 units.
Although the company does not have complete data at what happens at the retail level, Killoy ventured that stores largely sold all the gun stock they had.
“The retail information we gather suggests that retailer inventory of Ruger as well as most of the firearms brands was largely depleted in the second quarter and remains at very low levels,” he said.
But it hasn’t been only the pandemic and societal anxiety that is boosting firearm sales, according to Killoy. He said that the company has been “pleasantly surprised” by the sales of hunting rifles, which he attributed to a “macro trend” in a COVID-19 era society with “the ability of people to do things close to home, get back to their roots, take up some of their passions and hobbies they maybe they had put in hold. … The whole ‘field to fork’ movement is strong, and we think that is part of what we’re seeing.”
Forced to suspend hiring in March and April while it grappled with implementing health safety protocols for factory workers, Ruger subsequently has hired 50 new employees and is scheduling shifts into the weekend, the company said. Ruger employs about 1,600 people across three manufacturing facilities — in Newport and plants in North Carolina and Arizona in addition to a corporate headquarters in Connecticut — although still far short of the 2,110 it employed at its peak in 2016.
Ruger had such an exceptional quarter that the company allocated $90 million in cash to declare a special dividend of $5 per share on top of the regularly scheduled quarterly dividend of 42 cents per share.
Killoy also noted that, as a measure to mitigate health risks among workers during COVID-19, all hourly employees were given an additional two weeks of paid time off.
For the quarter that ended June 31, Ruger reported net income totaled $18.6 million, three times the $6.2 million net from the same period a year ago.
The company has no debt.
Ruger’s fortunes contrast sharply with that of rival Remington Arms Co., which last week filed — for the second time in two years — for bankruptcy protection. Remington, unlike Ruger, has been weighed down by massive debt and faces litigation issues related to the 2012 Sandy Hook Elementary School mass shooting.
Not surprisingly, Ruger’s strong second-quarter results has sent its stock price soaring.
In January, Ruger’s stock was trading at around $47 dollars per share and had sunk as low as $38.44 per share in the previous 52 weeks.
On Friday, it closed at $81.37 per share, exceeding its prior all-time high of $80.55 per share on Jan. 10, 2014.
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