View Full Version : S&W posts large losses for Q3 2008
Saw this report on Michael Bane's blog, that S&W is posting a net $76.2 million loss for the quarter that ended 10/31/08.
http://michaelbane.blogspot.com/2008/12/implications-of-s-losses.html
Apparently the main issue is S&W's acquisition of Thompson Center arms, and the simultaneous large decline in consumer purchases of hunting rifles. The new acquisition made S&W's overall profitability much more dependent on the hunting rifle market, and that market has not fared well the past year.
The odd thing is, S&W did well in other areas of their business. For example, pistol sales grew 40%, and revolver sales grew 13% over the same period a year ago. And their S&W tactical rifles are doing well too.
Hopefully S&W will be able to make the right moves and continue their profitability, long-run. In the short run, it doesn't sound good as they've had to lay off workers and start other cost-cutting measures.
It's the second quarter of their FY09 that ended 31-Oct-08.
If you read the actual report (http://ir.smith-wesson.com/phoenix.zhtml?c=90977&p=irol-newsArticle&ID=1236283&highlight=), it was a $76.5M charge related to writing down "goodwill and intangible assets" from the TC purchase.
The only major decline they had was in hunting rifles, which is a market segment they were just dumb to get into from the beginning.
Certainly not a stellar quarter (even without the impairment charge, their net dropped from almost $3M to about $250k compared to the same period last year) but sales of their pistols and ARs rose sharply ... and this is before the post-election mad rush.
Part of the fallout of this is that it hurts S&W's overall health for the long run, it sent their stock shares down by up to 25%. The article also mentions that they shed 80 production jobs from their rifle-related manufacturing facility in Rochester, NH.
What you worry about here is....
* For the bigger picture, I hate to see yet another American gun manufacturer face potential failure. Of course, they haven't failed YET, but too many quarters like this, and they will.
* Also concerning the big picture, Bane's blog raises the issue of the decline of hunting long-term in the U.S. Apparently, some people believe we are seeing a steady, long-term decline in hunters, and this (if true) will inevitably affect the gun industry as a whole. I don't know for sure that hunting is declining nation-wide, but to me, knowing the regions I have lived in and the communities I have known, it sure FEELS like hunting is in decline. We are just not getting the next generation as involved, and a higher % of the US population than ever before is living in cities (something like 95% now are in urban areas, versus only about 5% to 10% just over a century ago). If this trend is real, it's going to keep impacting companies like S&W, and they will have to keep readjusting their targeted markets to stay alive.
* On the smaller scale, you worry about what the weakening of companies like S&W will mean for the long-term support of the S&W products you own. I'm sure hoping S&W can thrive and survive despite the economic times, they are a great company and I have consistently favored their products.
30 cal slut
12-28-08, 05:09
It's the second quarter of their FY09 that ended 31-Oct-08.
If you read the actual report (http://ir.smith-wesson.com/phoenix.zhtml?c=90977&p=irol-newsArticle&ID=1236283&highlight=), it was a $76.5M charge related to writing down "goodwill and intangible assets" from the TC purchase.
The only major decline they had was in hunting rifles, which is a market segment they were just dumb to get into from the beginning.
Certainly not a stellar quarter (even without the impairment charge, their net dropped from almost $3M to about $250k compared to the same period last year) but sales of their pistols and ARs rose sharply ... and this is before the post-election mad rush.
and it's a non-cash one-time item that analysts usually ignore for the purposes of valuation.
the F3Q y/y comps should look pretty stupid, thank to BHO. I wonder if he gets S&W's employee of the month award. :D
the F3Q y/y comps should look pretty stupid, thank to BHO. I wonder if he gets S&W's employee of the month award. :D
I'm sure they made up in Q3 with the M&P line
S&W might have paid a little to much money for TC, but they are making good use of their capabilities (as TC is making a lot of parts now for their AR's). I would guestimate that S&W now makes just as many parts in house as Colt does! Something most AR manufacturers cannot boast.
If there is an AWB, the hunting market will most likely take off again and S&W will be doing well for certain.
C4
Alpha Sierra
12-28-08, 11:22
S&W might have paid a little to much money for TC, but they are making good use of their capabilities (as TC is making a lot of parts now for their AR's). I would guestimate that S&W now makes just as many parts in house as Colt does! Something most AR manufacturers cannot boast.
If there is an AWB, the hunting market will most likely take off again and S&W will be doing well for certain.
C4
Not to mention the fact that TC ahs an in-house set of core skills in the design and manufacture of precision bolt action rifles that can easily be translated into more, shall we say, "practical" rifles.
Not to mention the fact that TC ahs an in-house set of core skills in the design and manufacture of precision bolt action rifles that can easily be translated into more, shall we say, "practical" rifles.
Yep.
C4
S&W might have paid a little to much money for TC
C4
That may be the understatement of the year, given how few people are buying hunting rifles these days. :)
Gutshot John
12-28-08, 11:57
I'd buy a TC-S&W built scout rifle.
Especially with a detachable mag well that would fit FAL mags. ;)
quick question for those who might know better than me (which should be a lot of folks)-
I have *heard* that Smith is practically giving the M&P away. My semi-reliable source has suggested that the margins on the M&P handguns is virtually nil- Smith is pushing hard to recapture the LE volume that it has lost to Gaston&Co over the years. Any truth to this? If so, and if the prices on M&P's in particular begin to creep up to more sustainable/profitable levels, then Smith should be okay given the popularity of the M&P and its seemingly bright future.
I don't know if the above is true. In any event, IMO Smith has gone a long way in terms of making good guns and rebuilding good will among shooters. I reckon they will be fine.
S&W just did a 1-for-1 swap of our SW99 45ACP and 4513 Tacticals for new M&P 45's. Several other departments in the area had SW99's and they are taking advantage of the same offer. I'm very glad the department ponied up the bucks for training because I REALLY like the M&P.
Bill W.
If S&W is practically giving M&P's away it's certainly not reflected in their prices in my neck of the woods. In general, they're more expensive than Glocks.
matt -- Smith is making good money on the M&Ps. Not as much as they'd like (what company makes as much as it wants?) but the suggestion that they're "giving them away" sounds like it came from someone who wants you to believe Smith is being forced to lower the price due to lack of demand.
Demand for the M&P pistols and rifles both outstrip current production.
MarshallDodge
12-28-08, 16:54
Unless they have some sort of efficiency issue in the M&P pistol department then I would bet that they are making good money on them.
Hunting is huge here in the West so it is had for me to tell if that industry has dropped off. I would think that after Winchester dropped out for a time, there would be a piece of the market share to take.
Smith's problem with regard to the hunting rifles is that their new management said, "Hey, look at the huge chunk of the pistol market we got back with our new pistol! And look at the chunk of the EBR market we got with our M&P15! So obviously if we make a bolt gun, we'll get a nice chunk of that market!"
And that, as best I can tell, was about the sum total of their market research.
They assumed they would sell a bazillion bolt guns in a market that (1) already has an incredibly strong, dominant, economical leader in Remington, (2) has been shrinking steadily for years, and (3) which does not lend itself as much to "must buy the latest & greatest" as the pistol/EBR markets do. They assumed the Smith name would instantly sell rifles into a very conservative and tradition-minded market.
It cost real money to build all those i-Bolts, and now they're sitting on shelves with no one to buy them. The recent recall certainly didn't help the gun's image.
Smith would be in much better financial shape if the i-Bolt had never been born.
There's always the shotgun market :D
Does anybody ever even consider an I bolt when they want to buy a hunting or tactical rifle?
I wonder if they manufactured a CRF rifle if it would have sold better?
Alpha Sierra
12-29-08, 16:49
Does anybody ever even consider an I bolt when they want to buy a hunting or tactical rifle?
I wonder if they manufactured a CRF rifle if it would have sold better?
I think CRF would have been key, to me. I don't want a bolt action for any serious work (including hunting) that is not CRF. Whether that is traditional Mauser-style like CZ, Kimber, or Winchester, or another interpretation like Sako's 85 or Winchester's CRPF.
However, it is hard to consider an I Bolt (or Thompson/Center Icon) as a tactical rifle unless you want to buy one for the action and have a riflesmith build you one since S&W does not make tactical bolt actions.
since S&W does not make tactical bolt actions.
SHOT is just a couple weeks away ...
03humpalot
12-29-08, 17:02
SHOT is just a couple weeks away ...
Indeed my good man.
However, it is hard to consider an I Bolt (or Thompson/Center Icon) as a tactical rifle unless you want to buy one for the action and have a riflesmith build you one since S&W does not make tactical bolt actions.
I think this isn't well known yet, but the action of the TC Icon was designed with tactical rifles in mind, and the TC "Warlord" tactical rifles just came out this year. I made a post about it on another forum, with some links.
http://forums.1911forum.com/showthread.php?t=216142
Alpha Sierra
12-29-08, 17:49
SHOT is just a couple weeks away ...
I know. I should have said "that I could find in their current lineup" :D
Alpha Sierra
12-29-08, 17:53
I think this isn't well known yet, but the action of the TC Icon was designed with tactical rifles in mind, and the TC "Warlord" tactical rifles just came out this year. I made a post about it on another forum, with some links.
http://forums.1911forum.com/showthread.php?t=216142
Wow. Now THAT is cool!
I currently do not have a precision bolt action repeater (having sold off my Highpower bolt gun), but this one could find its way into the locker.
I have *heard* that Smith is practically giving the M&P away. My semi-reliable source has suggested that the margins on the M&P handguns is virtually nil- Smith is pushing hard to recapture the LE volume that it has lost to Gaston&Co over the years. Any truth to this?
matt -- Smith is making good money on the M&Ps. Not as much as they'd like (what company makes as much as it wants?) but the suggestion that they're "giving them away" sounds like it came from someone who wants you to believe Smith is being forced to lower the price due to lack of demand. Demand for the M&P pistols and rifles both outstrip current production.
"Giving them away" is subject to some definition, but not altogether inaccurate. S&W reps have in fact inked some sweetheart deals. Deals like no-cost trades from older S&W models or competitor product, or buys at substantially lower than regular LEA pricing.
If you're a more iconic customer/good posterchild, if you can offer a foothold to S&W in competitor country, if you're a longstanding S&W agency considering a switch to GI or others, or if you're an agency that can influence satellites around you, there's a deal to be made. Not necessarily free, but certainly better than most would know.
Deliver big, and the troops can get good buys on their off-duty compacts, too.
All this, from mouths at S&W.
Trades with little to no cash involved also help limit issues that might otherwise arise with purchasing/procurement, competitive selection, and public information.
Nothing unique to S&W, but perhaps a little more important there than elsewhere.
Nothing unique to S&W, but perhaps a little more important there than elsewhere.
As you said, there is nothing unusual or unique here. Beretta did it while I worked there. SIG did it while I worked there. Glock does it all the time.
"Giving them away" is what Glock did with NYSP. That's a huge difference.
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