Per FBI data, the bureau processed a record 39.7 million firearm background checks in 2020, by far the most of any year since the agency started recording this data in 1998. That did not come as a surprise, as MRP had already noted that last year’s tally of background checks had already surpassed 2019 totals by October.
The National Instant Criminal Background Check System (NICS) accounts for checks related to anything from the sale of firearms themselves to concealed carry permits, suppressor sales, etc. Checks exclusively related to the sale of firearms also reached a record high at 21 million, according to firearm trade organization National Shooting Sports Foundation (NSSF). That represents a 60% increase over 2019’s total of 13.2 million.
Firearms manufacturers closed out the year on strong financial footing.
Sturm, Ruger & Co.’s (RGR) Q4 profits saw a nearly fourfold jump, as net income was $31.7 million, and sales grew 60.9%. Diluted earnings were $1.73 a share, compared with just $0.45 a year ago. Per CEO Christopher J. Killoy, “[the company’s] workforce has been strengthened by 250 folks since the middle of 2020, which drove a 30 percent increase in production during the latter half of the year.”
Smith & Wesson Brands, Inc. (SWBI) is set to report Q4 2020 earnings tomorrow. In their Q3 results, reported last December, the manufacturer saw non-GAAP income of $52.8 million and diluted earnings of $0.93 per share, up from $0.01 in the same quarter of 2019, and easily beating the consensus estimate of $0.63. The firm earned $248.70 million during the quarter, compared to analyst estimates of $222.99 million. Mark Smith, SWBI President and CEO noted that those figures represented a second consecutive record-breaking quarter for the 168-year-old company.
If the first two months of 2021 are any indication of what we can expect for the rest of the year, all of those annual records may be smashed again.
Gun merchants sold more than 2 million firearms in January, a 75% increase over the estimated 1.2 million guns sold in January 2020, according to the NSSF. Meanwhile, the FBI conducted a record 4.3 million background checks. If that pace continues, more than 50 million gun-related background checks will be conducted by the end of the year, shattering the current record set in 2020, according to a new report from Bespoke Investment Group.
Though gun sales alone have been robust, MRP has noted repeatedly that ammunition sales have been especially hot, stripping inventories to the bone for many months now. As the Houston Chronicle reports, gun and sport shops across the country have faced waves of gun owners outside of their stores before opening, lining up to get in and stock up before they sell out again. The spike in demand has driven prices on ammo up as much as 300% for those lucky enough to find it. Bullets that used to cost between 20 and 35 cents per round now cost $1 or more.
About 8.5 million people became new gun owners last year, according to the NSSF, an unprecedented increase. A MRP previously highlighted, dealers surveyed by the foundation last summer found that about 40% of their sales came from first-time gun buyers. Typically, this group represents just one quarter of guns sold.
The bullets business is typically a cyclical one. Sales rise and fall in tandem with the heat of hunting season and most gun owners stockpile their ammunition over the long-term. However, with so many new gun owners that needed to get their hands on ammo immediately, the rush for ammunition was fierce and unabating all through the year, giving ammo manufacturers no time for a re-stocking season.
Vista Outdoor Inc. (VSTO), owner of several ammunition brands including Remington, Federal, Speer, CCI, saw a 400% increase profits for their most-recently reported quarter. In the quarter ending Dec. 27, Vista’s net income was $78.9 million, while EPS came in at $1.31 per share, doubling expectations of $0.65. Revenue for the quarter was $574.7 million, up 35% from the same quarter a year prior.
Olin Corp. (OLIN) said their Winchester brand ammunition delivered the best quarterly performance in its 155-year history in the quarter ended December 31, due to outsized demand for ammunition, with even better quarters expected throughout 2021. As SGB Media writes, annual revenues for the Winchester segment reached $927.6 million, up from $665.5 million in 2019. Profits more than doubled to $92.3 million from $40.1 million. Winchester’s profitability has been helped by the segment’s ability to pass through three or four price increases over the last six months.
Though background checks and sales figures decelerated to 3.44 million and 1.39 million, respectively, last month, it was still the strongest February on record. That’s likely due to an easing of fears surrounding new legislation on gun ownership, as the new White House administration is held up trying to pass new stimulus measures.
Along with fear of social unrest in the wake of the COVID-19 pandemic and national protest movements, the US election season and potential political shift played a significant role in rising firearm sales last year. For those who strongly oppose regulatory reform in regard to firearms, those fears were realized when Democrat Joe Biden sealed his victory in the Presidential election.
As MRP noted during the campaign and in the aftermath of the November 2020 election, Biden had laid out several initiatives that would be particularly strong on firearms:
Biden has said he will not only re-enact an assault rifle ban, but work to bar the manufacture and sale of “assault weapons” as well.
Technically, the AR-15 and other semi-automatic rifles (which fire only one round per trigger pull) that have come under scrutiny for their use in a number of mass shootings, are not assault rifles. Because of this, some policymakers have shifted their language over the past few years, creating the term “assault weapon”, a more open ended and undefined term that can encompass a wider array of firearm models. Biden’s campaign website exclusively uses the term assault weapon, as opposed to assault rifle, indicating the likelihood of a broader crackdown on firearms than the 1994 assault rifle ban.
Under the National Firearms Act, all existing assault rifles would have to be registered, which adds a $200 tax and lengthens the background check wait time from minutes to months. Under Biden’s full firearms plan, these reforms would come along with a restriction on the number of firearms citizens can own, as well a limit of one gun purchase per month.
Further, the Biden campaign would work to ban the manufacture and sale of assault weapons. The Biden-Harris campaign website notes that Joe would prioritize repealing the Protection of Lawful Commerce in Arms Act, a law shielding gun manufacturers from civil liability when one of their products is used to kill or harm. Clearly, the repeal of this law could be financially catastrophic for America’s gun producers.
Democrats’ two Senate seat pickups in January’s Georgia run-off races equalized power in the chamber at a 50-50 spilt between Dems and GOP. However, in the result of any tied vote in the chamber, Vice President Kamala Harris would serve as a tiebreaker, effectively giving the Democrats an overall advantage.
Democrats also command a small majority in the House of Representatives, making their hold on the legislative and executive branches of the US government relatively solid.
Though a first batch of new legislation on gun reform, introduced by House Democrats earlier this week, was pretty tame, it is probably a first step toward more aggressive action. As VICE writes, the Bipartisan Background Checks Act of 2021 would require a background check on all firearm sales. Under the current law, only licensed gun dealers must perform background checks for those looking to purchase a firearm. That excludes gun sales from unlicensed gun dealers, gun shows or online retailers.
While we’ve finally seen the gun-buying frenzy begin to slow just a bit, that doesn’t mean the sales surge is over – especially since the US political environment remains as fraught as it has ever been just 2 months removed from a major riot in Washington DC that breached the US capitol building.