RGR - Sturm Ruger stock slides on margin contraction signal of declining demand

2023-05-04 10:51:35 ET

Sturm, Ruger & Company ( NYSE: RGR ) shares declined by nearly a double-digit percentage on Thursday after flagging falling demand for firearms.

The Connecticut-based firearms manufacturer notched $0.81 in earnings per share, $0.16 below the analyst consensus, while $149.45M in revenue rose $10.66M above consensus expectations. Gross margin decreased from 35% to 26% year over year as a result of “unfavorable deleveraging of fixed costs resulting from decreased production and sales, inflationary cost increases in materials, commodities, services, energy, fuel and transportation” during the quarter. Finished goods inventory and distributor inventories of Ruger products declined by 3,900 units and 6,600 units, respectively.

“Decreased consumer demand led to a 10% reduction in first quarter sales compared to the prior year. We took a disciplined approach, targeted a production mix that better aligned with consumer demand, and continued to responsibly manage our overall production levels to reflect market conditions as we did throughout 2022,” CEO Christopher J. Killoy commented. “This is evidenced by the slight reduction in both our finished goods inventory and the inventory of our products at distributors, which sets us on a solid path for the remainder of the year.”

Killoy also highlighted legislative overhang on the industry as well as actions taken by financial institutions to constrain the industry.

“We are encouraged by the actions taken by several states prohibiting state agencies from engaging with banks that discriminate against the law-abiding and highly regulated businesses in the firearm and ammunition industry,” he said. “We are hopeful that federal legislation to discourage such practices, including the Firearm Industry Non-Discrimination Act (or the FIND Act), will be enacted to put an end to this unjust treatment of our industry. This hits us close to home as we have been notified twice in the past five years by two of the nation’s largest banks, Bank of America and Wells Fargo, that they would not provide us with any credit because of the lawful products that we design, manufacture, and sell.”

Shares of Sturm, Ruger & Company ( RGR ) slumped 9.29% during Thursday’s trading.

Read more on the details of the results .

For further details see: