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.
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 were 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” increase 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 was 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%
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, decrease of 34.4%
- Hunting Firearms – $6.7 million, decrease of 23.5%
Under the operating expenses section of the report, S&W decreased overall administrative and marketing expenses by more than $1.1 million, and increased research and development by almost 50% to nearly $1.6 million.
The effective tax rate for the quarter was a whopping 40.05%.
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.
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 interest in making an investment in Smith & Wesson, you should go read the report for yourself, talk to an experience investment advisor and forget you ever were here.
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