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Investors reacting to the drop in gun sales sent Vista Outdoor‘s stock price plummeting last week after executives reported high inventory levels for ammunition amid a slow moving market that’s expected to continue into the next quarter and fiscal year.
Vista president and chief executive officer Mark DeYoung told investors Thursday part of the negative results are tied to the presidential election, but they also saw late holiday shopping and a weak hunting season.
“We are seeing challenges in general in retail. We are seeing challenges in general across our distribution network as consumers have pulled back. So we are seeing some of those pressures in both areas primarily again in the hunt and shoot,” DeYoung said, adding “If you are not buying a new rifle, you are not buying a new scope.”
DeYoung explained there has been “a very quick pull back in terms of demand and sale through” causing inventories to build for distributors and retailers.
Vista saw a 10-percent increase in quarterly sales with $654 million, but the company reported a $385 million loss with $449 million impairment costs related to an Army ammunition plant. Revenue from gun and ammo sales contributed $361 million, up only 1 percent from last year. Overall gun sales also had only a marginal change from last year quarter — with 0.14 percent fewer, according to adjusted figures from the federal background check system.
Since ending its third quarter, Vista stock price dropped $8 per share, but still adjusted sales for the fiscal year from $2.5 billion to $2.54 billion. Moving forward, DeYoung said the challenge to understanding the “new normal” is understanding the market under a pro-gun administration coming down from one viewed as hostile toward gun ownership.
“This big inventory build that occur in retail and wholesale in advanced to the election compounds the problem at least in the near term as we need to work through those inventories. So there is a little bit of different there and that was a fairly significant shift prior to what has been a fairly rapid decline. So that may compound it at least in the near term for a little while,” said DeYoung.
But the silver lining coming from the Obama Administration maybe new shooters. “There are a lot of new people that have come into the Shooting Sports and put firearms for the first time or the second or the third or the fourth. And so we know there is a larger installed base of people or consumer product which I think bodes well in the long term,” DeYoung said.