Smith & Wesson Quarterly Report Offers Insights

The Smith & Wesson quarterly report for the period ending July 31, 2011 was filed yesterday.  Reading through these reports offers some amazing insights into the goings-on of a publicly traded company.

The reports can also make your eyes glaze over, and suck the will to live from you.  So to help you avoid such a fate, here are a few of the highlights.

The Good

For the quarter ending July 31, 2011, Smith & Wesson net product and services sales were up 18% ($14 million) to $91.7 million as compared to the same quarter the previous year.

S&W reported a “significant increase” in the sales from their Sigma line of handguns, which they attributed to the company’s “price repositioning strategy.”  Sigma handguns in both 9mm and .40 S&W are typically found in the $270-290 price range. At these prices, the Sigma offers an incredible value to the shooter on a budget.

The Bodyguard line of handguns also was profitable for Smith & Wesson during the last quarter. Though exact figures were not listed, S&W cited the Bodyguard line as having “continued market demand.” Large police agencies adopting the Bodyguard 380 as a back up gun certainly help.

No sales numbers were offered, but the introduction of the Governor revolver was mentioned as a reason for increased quarterly sales. The Governor started shipping to retailers in May.

The Sport model of AR-15 “significantly” increases sales in the modern sporting rifle line for S&W. Smith & Wesson stated the rifle “hits attractive price points.” With an MSRP of only $739, I have seen rifles go for less than $650 locally.

Smith & Wesson made a serious effort to re-establish the company in the law enforcement market with the introduction of the M&P line.  Sales of firearms to state and local agencies were up 1.7% to $5.7 million.  Sales to the federal government were 61.5% higher to $1.7 million.  Much of the increase to the federal government is likely associated with the BATFE selection of the M&P as one of two firearms being authorized for carry (the Glock being the other).

Large orders from Australia and Taiwan increased S&W’s international sales by 26.7% to $5.6 million.

Net Product & Services Sales

• Handguns – $53.8 million, up 26.6%
• Modern Sporting Rifles – $14.9 million, up 114.4%

The Bad

Smith & Wesson noted that Walther America sales were down.  Increased competition in the small frame and concealed carry markets around the .380 ACP and .22 LR cartridges were cited as a cause of lagging Walther sales.

S&W stated the ongoing move of its hunting product line from the Rochester, NH facility to the Springfield, MA plant as a major reason why the company experienced a sales decline in this sector.  Black powder sales, along with productivity and efficiency issues were specifically cited.

Net Product & Services Sales

• Walther – $6.7 million, a decrease of 34.4%
• Hunting Firearms – $6.7 million, a decrease of 23.5%

Speculation

It would appear that Smith & Wesson has had a great deal of success with the aggressive pricing strategy for the Sigma line of pistols.  Because of this, I would expect to see those guns remain in the S&W stable for a number of years still.

The really interesting thing is S&W has significantly increased its R&D expenditures in the quarter, suggesting they are cooking up some new toys.  It could be an interesting SHOT Show.

---

Disclaimer

The information presented in this article is NOT intended as financial advice.  I am NOT someone you should ever listen to for financial advice.  I do NOT offer the above information for anything other than entertainment.  If you use this article to assist you in making financial decisions, you are a fool.  If you have an interest in making an investment in Smith & Wesson, you should go read the report for yourself, talk to an experienced investment advisor and forget you ever were here.