Smith & Wesson to spin-off from American Outdoor Brands

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labnoti

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The board is spinning off the gun maker from its other assets in a reversal of Mitchell Saltz and Robert Scott's strategy over the last twenty years to diversify Saf-T-Hammer Corporations holdings beyond the gun maker they bought from British Tomkins corporation. Apparently they are concerned about the ability to insure, raise capital from investors, obtain loans and sell products for their other businesses with the politically toxic asset of S&W tied up among them. They announced James Debney will run AOBC, and Mark Smith will run S&W. It's not clear to me whether there will be two separate boards or not.
 
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Curious to see if this little tap dance will affect Buffett's stance.
 
It could be that the glut of guns these days is reducing the profit margins at S&W and the total picture these days is not as bright as it was 5 years ago.

Keep in mind that any business that wants to stay in business has to adapt to the current business climate for its products. I would bet most gun companies have wrung every penny they can out of their costs and sold just about every gun they can. The growth just is not there in part because of new companies coming into the market putting downward pressure on pricing.

How many guns are Americans going to buy? If you have 10 or 20 or 30 already, are you going to buying many more?
 
The market as-is; yes, is scrambling on many fronts and some predict that future consumerism in the field will be led by high tech innovation the likes of which we can only imagine. "The times they are a changin."
 
You never know. I worked for a large company a few years back. We were spun off from our parent and some of our employees ended up ringing the bell at the NYSE as we were welcomed. A month later we heard that we were being purchased by another large company. I think it was all planned before the spinoff. Maybe another large outdoor company will purchase S&W. Maybe it is already in the works.
 
I don't think this is a result of sales per se. It has more to do with obstacles to financing. Saltz and Scott's original strategy was to diversify S&W beyond just guns because gun sales are cyclical. At one point years ago, they could assure a steadier stream of revenue by diversifying. Vista Outdoors has pursued the same strategy because it made sense. The problem has come up that the gun business is polarizing. AOBC has less a probem with sales boycotts than Vista Outdoors because it doesn't really sell anything to snowflakes at REI. Most of AOBC's other brands are lasers, optics, accessories, reloading equipment, gun safes and knives. They also have a precision parts manufacturing business. The problem for them appears to be in obtaining financing and insurance. Investment bankers and insurance underwriters have fewer concerns working with all those businesses when they're not tied to a gun maker. Some of that is based on risk and some of it is based on "social responsibility."
 
They may see the continuation of the Remington suit as signaling a wave of upcoming lawsuits. The cultural shift against ‘evil guns’ may make their production a risk.

Hadn't thought of that but it is possible. The announcement about Remington and Smith came within a very short time span. I think I saw both on my feed a day apart. With Remington going up and down through the courts, execs at American had plenty of time to crunch the numbers.
 
You have to remember that Bob Scott bought ALL THE REVOLVERS and the entire Smith & Wesson company to put a lock on them. Why would someone think he will change that so they will buy one revolver or three? Bob bought the production of over two and a half million revolvers to put his lock on them. Will you really change his mind with how many revolvers you're going to buy? I can hear his response now. "I'm sorry, I can't hear you over the sound of the million pistols I'm making this year." He's not a jerk that's insensitive to customers. He bought a company that was simply going to be shut down by Tomkins and ended forever. He bought it for $15 million and turned it into a half-billion dollar business. He doesn't hear Jerry Miculek complaining about how he'll never use a S&W with the lock. There actually isn't anything wrong with the lock. But there's some guy on the internet that says it's a "hillary hole" and that he knows better what Smith & Wesson should do?

Why is it that some whiney consumers think they are going to do manufacturers a huge favor if they'll bend to their petty will? S&W makes more AR15's than it does revolvers, and its pistols outsell the rifles 4 to 1. More revolver sales aren't going to drive their profits up. They spent over $500 million this year. If they can cut the cost of their financing by a tiny fraction, it will save them more money in one deal than the revolver business makes in years. Revolvers are just not big business. They're only about 13% of the guns S&W makes, 10% of Ruger's production, and 9% of Kimber's. There really isn't anything short of a semi-auto ban that will increase that, but there are a lot of things that can decrease it by growing their other businesses that have more potential. Their revolver business isn't broken and does not need fixing.
 
You have to remember that Bob Scott bought ALL THE REVOLVERS and the entire Smith & Wesson company to put a lock on them. Why would someone think he will change that so they will buy one revolver or three? Bob bought the production of over two and a half million revolvers to put his lock on them. Will you really change his mind with how many revolvers you're going to buy? I can hear his response now. "I'm sorry, I can't hear you over the sound of the million pistols I'm making this year." He's not a jerk that's insensitive to customers. He bought a company that was simply going to be shut down by Tomkins and ended forever. He bought it for $15 million and turned it into a half-billion dollar business. He doesn't hear Jerry Miculek complaining about how he'll never use a S&W with the lock. There actually isn't anything wrong with the lock. But there's some guy on the internet that says it's a "hillary hole" and that he knows better what Smith & Wesson should do?

Why is it that some whiney consumers think they are going to do manufacturers a huge favor if they'll bend to their petty will? S&W makes more AR15's than it does revolvers, and its pistols outsell the rifles 4 to 1. More revolver sales aren't going to drive their profits up. They spent over $500 million this year. If they can cut the cost of their financing by a tiny fraction, it will save them more money in one deal than the revolver business makes in years. Revolvers are just not big business. They're only about 13% of the guns S&W makes, 10% of Ruger's production, and 9% of Kimber's. There really isn't anything short of a semi-auto ban that will increase that, but there are a lot of things that can decrease it by growing their other businesses that have more potential. Their revolver business isn't broken and does not need fixing.
Then why doesn't he put a lock on S&W semi auto pistols?
 
This is about a brake on financing access as financial institutions apply pressure on firearms businesses, and mitigating litigation risk related to the firearms business. I'm sure the consortium controlling the parent company's revolver (no pun, it's a standing line of credit) lay down some draconian restrictions at the most recent renegotiation. It will mean that S&W has much more limited access to capital moving forward. Not good really.
 
So they see Remington in litigation on the question of allowing gun companies to be sued. If the case goes against Remington, which it did, they've got to figure they're not far behind in suits against them.

So in order to limit liability, they divest S&W, leaving it on its own. If huge verdicts come in against it, they will allow S&W to go under, hopefully without taking the rest of the conglomerate with it.

Simplified reasoning, but it may not be far from the truth. Thinking about buying a S&W, probably not a bad time to do it.
 
Why would you shill for the hole? I don't care if Bob reads this post, the hole still sucks and it's still a bad thing and I still wish it was gone. I'm only 30 and I got into shooting with milsurp rifles and chasing brass for exotic calibers got me interested in revolvers.

Because of the hole I bought Ruger revolvers, and then Ruger ARs and other Ruger rifles because that's the brand I bought into. I now own three Ruger rifles and seven Ruger revolvers, all because of the hole.

Maybe Bob doesn't need to care about this but seeing as I'm posting with y'all and not Bob I thought the opinion might be of interest.
 
Then why doesn't he put a lock on S&W semi auto pistols?

Fair question. It has to do with what Saf-T-Hammer invented. Saf-T-Hammer is the Scottsdale Arizona company that Bob ran after he left S&W, and it's the company that bought S&W. AOBC is actually Saf-T-Hammer renamed. I believe Saf-T-Hammer created the revolver lock and it works. How many other firearm locks actually work well? Maybe its a personal triumph for someone whose other products were totally humiliated by the gun press. You'd have to ask Bob.

Why would you shill for the hole? I don't care if Bob reads this post, the hole still sucks and it's still a bad thing and I still wish it was gone. I'm only 30 and I got into shooting with milsurp rifles and chasing brass for exotic calibers got me interested in revolvers.

Because of the hole I bought Ruger revolvers, and then Ruger ARs and other Ruger rifles because that's the brand I bought into. I now own three Ruger rifles and seven Ruger revolvers, all because of the hole.

Maybe Bob doesn't need to care about this but seeing as I'm posting with y'all and not Bob I thought the opinion might be of interest.

Why does the hole suck? Why is it a bad thing? Why would you buy Ruger just because of the hole? Isn't that irrational?
 
Why does the hole suck? Why is it a bad thing? Why would you buy Ruger just because of the hole? Isn't that irrational?

I'd choose an old S&W over a holey S&W because if I need my handgun, I need it now.
No keys, No locks.

It's that simple.
Works for some people, but not for me and I gather, much of the rest of the market
I also don't trust "safeties" including locks. Is that irrational?
 
There have been reports of the lock inadvertantly engaging on large bores. I don't think it's much of a risk, but when choosing why introduce the opportunity for a failure? I have no magazine safety handguns either, not because they're inherently flawed per se but because I can just as easily get one with a truly 0% chance of failure that's just as good in all other regards.

Sure, a lock failure on a S&W might only be 0.0001% chance, but its 0.0% on a Ruger and they're just as good otherwise. I don't think it's entirely ilirrational.
 
I hope S&W gets rid of the lock. If you're going to lock a revolver, open the cylinder and put a padlock around the frame, that way there is no mistaking the pistol is inoperative. I bought a 686 with the lock but removed it and plugged the hole with a matching stainless plug secured from the inside with an X washer.
 
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