American Outdoor Brands Corp., which makes Smith & Wesson firearms, plummeted following a warning of a long sales slump.
Demand by consumers for firearms has fallen to new low levels that might continue for an extended period, said a statement released by the company on Thursday as it posted its earnings. The company said it is cutting its costs and paying it debt to weather this downturn.
CEO James Debney said the company would operate its business under an assumption that the next 12 to 18 months could result in flat revenue for firearms. The company said that it pared its workforce in manufacturing by 25% during the last year.
The bleak outlook underscored the drop in sales of firearms since President Donald Trump was elected in November of 2016, easing the rush amongst gun buyers to purchase firearms prior to possible new federal gun law restrictions.
Shares of gun makers have plunged since the February 14 massacre that killed 17 people at a high school in Florida. American Outdoor was the maker of the AR-15 assault rifle that was used in the attack.
Shares of American Outdoor plummeted 14% in late afternoon trading. Shares have fallen by 27% in 2018 through Thursday’s close. That followed a drop of 39% in 2017.
Background checks for firearms compiled by the FBI, which are a proxy for the number of sales, were down 8.4% in 2017, after increasing 13 of the past 14 years.
The checks for January reached their lowest for the last six years.
American Outdoor forecasted earnings of between 31 cents and 33 cents per shares for its current fiscal year, which trailed the low estimate of analysts that were expecting 60 cents.
The company reduced its sales goal for the current fiscal year that ends April 30 to its midpoint of $598 million from its projection in December of $662.5 million. Wall Street was expecting $655.5 million.
American Outdoor has repaid over $75 million over the past few months in preparation of a long-term slowdown, and extended the due date for over $75 million of its notes to August of 2020.
The firearms industry was already going through a difficult period since the election of Trump, but has now been hit head on following the school shooting in February that has seen a backlash from large retailers that have placed restrictions on gun sales as well as age limits.