RGR - Sturm Ruger stock drops as consumer demand for firearms subside from 2020 levels

Sturm, Ruger ( NYSE: RGR ) shares dropped 9% on Thursday after the firearms maker reported its second quarter results that showed a waning consumer demand for the product compared to "unprecedented" levels in the past two years.

Late Wednesday, the Connecticut-based firm reported revenue of $140.7M for the quarter that fell 29.7% Y/Y and missed estimate of $156.4M issued by two analysts. Earnings of $1.17 per share was $0.33 below estimates.

Gross margin decreased from 39% in the second quarter of 2021 to 31%, mainly due to inflationary cost pressures and unfavorable deleveraging of fixed costs resulting from decreased production and sales.

Finished goods inventory and distributor inventories of the firm's products increased 49,300 units and 28,200 units, respectively, during the quarter.

For the six months ended July 2, 2022, net sales were down 20% Y/Y to $307.2M and diluted earnings were $2.87 per share (-38% Y/Y).

Speaking on the results, CEO Christopher Killoy said, "Consumer demand for firearms has subsided from the unprecedented levels of the surge that began early in 2020 and remained for most of 2021, resulting in a 30% reduction in our sales from the second quarter of 2021, which was the highest quarter in sales and profitability in our history. Yet our broad and diverse product family helps us weather fluctuations in demand as we adjust production accordingly."

Killoy reaffirmed the company's commitment to new product innovation, stating: "We are excited to continue to expand our Marlin product line with the reintroduction of the Marlin Model 1895 Trapper [...] look forward to introducing additional Ruger-made Marlin lever-action rifles."

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