Why can't gun companies make money?

I would imagine R&D and legal teams chew up profits pretty quickly, along with the fact that the firearms market is as flat as I have ever seen it at the moment.

Also keep in mind that the buyers set the selling prices, it doesn't matter how "fairly" the manufacturers set pricing, NOBODY wants to pay "that much".

And now, it seems, you are suggesting that companies either lay-off their staff or close the doors when it slows down........

business HATE to lay-off people or shutdown production lines, which interestingly enough, is the exact reason companies don't build new plants or add production shifts when slammed with orders.....they know eventually the orders will slowdown..

And Black Friday still broke background check records. I see some price drops but there is no huge glut of guns and certainly not ammo or components

Durable goods is a very tough game.

A couple of things that jump out at me...guns are durable goods. Properly cared for, they can last several lifetimes. To make a long story short, supply will always be higher than demand.

Kind of in the same vein, no matter what the latest thing is that manufacturers crank out, ultimately, we are still dealing with launching a projectile, propelled by gunpowder, down a tube. This basic premise hasn't changed, since 100 years before Columbus bumped into the Bahamas, while going the wrong way to get to China.

A new functional method for doing this hasn't been introduced to the market since the early 20th century. Ultimately, the reason gun companies aren't making money is that they have been marketing pretty much the same thing, for the last 100 years or more. It is, and has been for a long time, a buyer's market.

X-Rap said:

And Black Friday still broke background check records. I see some price drops but there is no huge glut of guns and certainly not ammo or components

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As stated above, the BUYERS set the selling prices.

Black Friday sales served the exact same purpose they always have, use bottom dollar LOSE money deals to get people INTO the stores to spend money on other products that have some profit left in them.

i agree with the posters above about guns being something that if you treat it right will last as long as you in the case of remington that is all on them i suspect some higher ups wanted more money and started makeing bad choices because of it as for s&w i dont know what went wrong there i just hope that ruger and other non screwy gun company's stay above water

Quote:
Originally Posted by X-Rap View Post
And Black Friday still broke background check records. I see some price drops but there is no huge glut of guns and certainly not ammo or components

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I would have imagine that many of those were for guns NOT made in the US, as many folks would rather buy some cheap POS import than support US makers which has forced them to make also make cheap POS guns so folks can come on places like here and bitch about it.

Self-fulfilling irony it seems....

Why can't gun companies make money?

and now we find Smith and Wesson had $175 million in debt and just bought a company with $100 million in debt?

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Hmmmm...genius decisions in the boardroom?

If you were personally in serious debt, but had a moderately positive cash flow, would you assume an additional 60% debt?

No? Neither would I. But some CEOs have their heads...in the clouds (to put it nicely).

And if they choose unwisely, they will just move on to their next several-hundred-million-dollar-per-year job.

That, in summary, is what is wrong with America today.
Okay, that is on over-simplification, but it is a good start.

What are you people thinking? Both Sturm, Ruger and Smith and Wesson have had good and rising profits over their last three fiscal years.

http://finance.yahoo.com/q/is?s=RGR+Income+Statement&annual

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http://finance.yahoo.com/q/is?s=SWHC+Income+Statement&annual

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They had great profit growth during the most recent gun buying panic. That they are not doing well as the panic subsides is not unexpected.

When the gun market stabilizes quarterly profit growth will resume. They both know how to efficiently make and market firearms.

Firearms are a very mature technology, with little room for ground-breaking innovation. There are multiple suppliers in the marketplace, leading to atomistic competition and low prices. None of them really "get" the "quality thing", and are using 1950s style process management.

We had a team at a major firearms plant, and they were improving processes like mad. For instance, they had about a 10% reject rate on bolts, which our guys drove to practically nothing. If firearms companies really "got" the "quality thing" like the car manufacturers have, then you would see consistent year over year cost reductions and defective product would be a great rarity. As it is, a new firearm is usually the beginning of a project.

Orion pointed out a harsh truth. The same VP's that make the bad decisions that tank public corporations will be hired again in another VP position, possibly in the same industry and kill yet another company. They bring their loyal peeps with them one at a time filling key positions. Makes you wonder how these companies let it happen. It ain't just the gun biness.

People are different.Maybe attract younger buyers with a game console? Built in phone?Ha-Ha.
Maybe a sign of the times. Lack of money for hunting gun purchases.
I wish someone would put more 22 ammo out there.

19-3Ben said:

Durable goods is a very tough game.

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This, Plus I suspect the EPA, ATF, and OSHA guys don't make it real easy on the factories.

There are two key issues with the firearms business. One, the hunting market is shrinking, and because they are durable goods, once you've got your shotgun and deer gun, you're probably not buying another one for twenty years. Unlike fishing where there have been huge changes in technology and presentation in the last twenty years or so, Dads old 870 will kill a Pheasant as good as a Beretta A400 will.

Two, there isn't a lot of profits in consumer hard goods anyway. By the time you pay for the R & D, the Safety stuff, production, legal compliance, etc. the stuff gets eaten up, profit is in volume with the exception of Boutique stuff like high end 1911's. Even the auto companies are probably making more profits on finance than automobiles. Remember part of that 175 million dollars in debt at S & W may be borrowed money at very low interest to "invest" in the market. So while they're paying 1-2% interest they're making 8-15% per year in profit on it. Don't get me started on THAT bubble.

Marketing always drums up demand for the latest and greatest. The new Social media has been a double edges sword. While promo videos are much more effective than the old gun magazine articles, a few bad reviews going viral and your new firearm sales go in the garbage.

I wonder how much product liability adds to the cost of guns and subtracts from companies' profits. I just saw that Remington is recalling over 7,000,000 rifles.

Weirdly really popular stuff goes quick and is hard to find and get.......while the not popular models are everywhere in bulk. Reminds me of many other industries.

Either keeping the supply of the desired items under control to keep the pricing higher and move the other not so wanted stuff.......or a lack of understanding of what the market wants? I lean towards the first....cause I've seen it in other industries.

The biggest issue is too much supply in makers vs. Demand. Look at all the choices. That said I'm not so sure these folks aren't making money and lots of it. Colt has been in trouble for years course they haven't invested or done much but run on auto pilot.....s&w is publicly traded so it's gonna get bad press when they leverage to much.

Last I knew Ruger was doing very well AND has no debt. They also moved early out of the north east to be able to stay profitable.

One can make money in the business and many do. However, as pointed out, it is small when compared to other industries and I think many companies have/are run by people who are rather clueless to the business.

As a boy in the 1950's?

There was Colt, S&W, Winchester, Ithaca, & Remington competing against each other for the same share of the market.
(plus a few smaller companies with lesser quality guns (Mossberg, H&R, H-S, etc, and then Ruger.) competing for the less expensive slice of the pie.)

Now?
Everybody with an out of work CNC machine is making AR-15's or plastic pistols and trying to underbid each other.

The big old companies that have to pay union wages & benefits, and major population center taxes, have a hard time competing with some little company who's founder employes all six kids, the mom is the book-keeper, and they would shoot their firstborn with one of their products if they mentioned union wages in Georgia.

Hard for a huge old firearms company in New England to compete with that!

rc

Let alone compete with China, Philippines, Turkey, Brazil or similar

bullzeye8 said:

now we find Smith and Wesson had $175 million in debt and just bought a company with $100 million in debt?

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http://www.forbes.com/sites/narrati...ith-wesson-holding-profit-expected-to-slip-2/

Don't confuse debt with losses. $175M in debt when you're making over $500M per year in profits isn't a problem. There are lots of good reasons for companies to take on deb. Things like R&D, expansion, etc. This doens't mean they're operating in the red.

I have two companies and I guarantee you that neither one will ever make any money. Why would they?

oneounceload said:

I would have imagine that many of those were for guns NOT made in the US, as many folks would rather buy some cheap POS import than support US makers which has forced them to make also make cheap POS guns so folks can come on places like here and bitch about it.

Self-fulfilling irony it seems....

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Yes yes, Glocks and HK and FN make cheap POS guns ROFL you're a riot.

US manufacturers don't always make the best product for what a person is looking for.




Durable goods...market saturation...not so strong economy...unions...litigation...

Why can't a rich businessman buy a NFL team and get them to win??? Can't transfer the success in one area to another. Most gun companies are run by non gun people.
Joe

Nathanael_Greene said:

I wonder how much product liability adds to the cost of guns and subtracts from companies' profits. I just saw that Remington is recalling over 7,000,000 rifles.

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That turned out to be false.