Story URL: http://news.medill.northwestern.edu/chicago/news.aspx?id=224458
Story Retrieval Date: 7/28/2014 11:25:21 AM CST
Sturm Roger & Company, a firearm manufacturer in the U.S. has seen booming gun sales over the last few years.
Gun industry seen slowing after sales explosion in past year
Fears of crime, terrorism and gun control have driven consumers to buy firearms at record high numbers. But that fear may be fading, causing analysts to grow more cautious on the firearms industry.
Michael Wendel, owner of Union Arms Company, a gun manufacturer in Berwyn, Ill., was surprised by what he called “unprecedented” demand over the past few years for guns and ammunition.
“There has never been anything like this ever,” he asserted.
A gun enthusiast for more than 30 years, Wendel said the surge in demand came in the wake of random, mass public shootings, such as the Sandy Hook Elementary School massacre in Newtown, Conn. last December and the 2011 attempted assassination of former Arizona Congresswoman Gabrielle Giffords in Tucson.
The fear factor has been a driving force behind the industry’s boom, analysts agree. Data from IBISWorld shows 8 percent annual growth in the gun and ammunition industry from 2008 to 2013, with industry revenue estimated to reach $14.7 billion this year, up roughly 20 percent from $11.7 billion in 2012.
Wendel manufactures boutique hand-made guns and while his business has remained fairly constant, he said competitors who offer a more traditional firearm product have seen a big jump in demand.
“Most people set out to purchase what they believed would be banned” under proposed gun control laws in the wake of high-profile gun violence, said Wendel, “mostly modern defensive rifles and pistols.”
“(People) have convinced themselves that prohibition is right around the corner,” said William Vizzard, a professor of Criminal Justice at California State University at Sacramento, which has driven gun sales in recent years.
But Vizzard and some others predict the current sales spike will not continue. Following past patterns, public fear in the wake of the Newtown school shooting is starting to fade and other factors are coming into play.
“Certainly the growth rate is going to slow,” stated Nima Samadi, an analyst at New York-based IBSWorld, “I don’t think anyone is denying that.”
Samadi dated the industry’s growth spurt to the Sept. 11, 2001 terrorist attacks, when more civilians bought guns for self-protection. The 2008 election of President Barack Obama and fears of stricter gun control laws caused another sales spurt. The Great Recession was also an influence.
“The industry experienced aggressive revenue growth during the recession, as consumers’ recessionary fears about rising crime and more restrictive gun control laws overrode their financial restrictions,” said Samadi.
A substantial increase in military spending by the government during the wars in Iraq and Afghanistan resulted in a big jump in purchases for the firearms industry’s military-related products. But as those wars have wound down and fears of terrorism decline over time, Samadi believes defense spending on guns will also decline.
Samadi and other analysts who cover publicly traded gun companies have grown more cautious on the industry. For example, as of Aug. 29, 50 percent of analysts rated firearms manufacturer Smith & Wesson a “buy”, according to Bloomberg LP. That contrasts with 71 percent rating the company a “buy” last November, as the Presidential election was held.
Andrea James, an analyst at Minneapolis-based investment bank Dougherty & Company LLC, argues the industry’s outlook remains favorable.
“We conducted a series of U.S. channel checks that showed that first-time gun buyers do not seem to be slowing,” she said, citing Federal Bureau of Investigation statistics that show a doubling of background checks for first-time buyers to 6 million from July 2011 to June 2013.
James noted a greater number of women purchasing guns through conceal carry laws. After going to a shooting range, women discover (target shooting) is fun, James said a Midwest retailer in her study reported.
“The primary and secondary drivers of gun purchases are self-defense and sport shooting, and those drivers should persist,” she concluded.
Data from the National Shooting Sports Foundation illustrate the thriving hunting culture, with a foundation survey finding that 21.8 million Americans hunted at least once over the past five years. The study also found that 78 percent of the U.S. hunters who bought a license in a given year also purchased one again the following year.
But Vizzard of California State University pointed to hunting licenses as a better indicator of the state of the sport.
The United States Fish and Wildlife Service reported that sales of hunting licenses declined in 33 states over the last two decades. In Illinois, more than 1.5 million hunting licenses were issued in 2011. One year later, that number dropped nearly 2 percent to roughly 1.4 million.
“For many, many years, the backbone of the gun market was hunting guns and competition guns,” said Vizzard. “That’s steadily changed over the years.”