Gun industry, gun stocks have boomed under Obama

And if talk about control laws continues to grow louder, firearms makers could see a rush in sales before any legislation takes effect.

By The Fiscal Times Dec 19, 2012 3:03PM

The Fiscal Times logoRed Arrow Pointing Upward copyright Fotosearch, Fotosearch, Getty ImagesBy Yuval Rosenberg


The gun industry, now facing renewed scrutiny in the wake of the tragic Newtown, Conn. school shooting, has been booming in recent years. 


This year, while consumers were picking up bargains on Black Friday, gun lovers set a new record for single-day purchases. How's that for the spirit of Christmas?


Although the FBI doesn't track sales directly, data suggest domestic gun sales have spiked significantly over the last four years. The Bureau reported more than 16.8 million background checks by the National Instant Criminal Background Check System through the first 11 months of 2012, already the highest total for any year since the system was introduced in late 1998 -- and nearly double the total from a decade ago even without data from December. Among states, the number of checks performed so far this year is highest for Kentucky (2,329,151), Texas (1,196,176), California (981,798), Illinois (923,920) and Pennsylvania (835,293).


As mandated by the Brady Handgun Violence Prevention Act of 1993, a background check is required in order to buy any firearm at retail. The background checks don't necessarily correlate to the number of guns actually sold as buyers might have changed their minds about their purchase, or might have bought multiple weapons.


The National Shooting Sports Foundation (NSSF), a gun industry trade association that happens to be headquartered in Newtown, Conn., touted the record number of background checks conducted in November in a recent blog post. For the second straight year, Black Friday background checks set a single-day record, as the FBI reportedly handled nearly 155,000 requests, up about 20% from roughly 129,000 in 2011. The following day's total of 88,419 background checks also earned it a place among the ten most active days. The NSSF blog also pointed to 30 straight months of increased checks compared to the same period a year earlier.


The rate of gun ownership has declined in recent decades, according to data from the General Social Survey, a long-running research project, and from Gallup pollsters. In 1959, when Gallup asked Americans if they had a gun in their home, 49% said they did. In 2000, that number was down to 39%, or 41% including those who had weapons elsewhere on their property. Yet a 2011 Gallup survey found that 47% of respondents said they had a gun in their home or on their property, the highest level since 1993, which prompted Gallup's Lydia Saad to suggest that, after a long downward shift, attitudes about gun ownership "may again be changing." 


Other recent analyses have found that while the percentage of U.S. households with guns has fallen, those Americans that do own guns have been collecting more of them.


Demand for firearms increased following the 9/11 attacks, according to an October report from IBISWorld, and background checks had been trending higher since 2003, but they rose sharply after President Obama was elected. The military is obviously a big buyer of guns and ammunition, and that helped drive some of the growth in sales seen during the years the U.S. was ramping up its anti-terrorism preparations and the wars in Afghanistan and Iraq. Spending by the military and law enforcement groups, however, fails to explain the surge the industry has experienced since late 2008, says Nima Samadi, an industry analyst with IBISWorld. While the overall economy suffered through the recession and then painfully slow growth coming out if it, the guns and ammunition business grew by 5.7% a year from 2007 to 2012, according to Samadi's October report, with growth from 2011 to this year expected to come in at 8.2%.


The gun industry "really just started its recent period of aggressive growth in 2008 with the wrap-up of the Obama-McCain election," Samadi says. "The biggest driver has been concern over a potential change in gun laws." 


There have been other factors, too. "A downturn in the economy probably reinforced some of those trends," according to Samadi. While past downturns resulted in cyclically lower sales of firearms, which remain big-ticket purchases, the Great Recession did not lead to that kind of slump. That reinforces some of the concern regarding a potential change in gun laws," Samadi says, "and it also shows that in times of uncertainty people turn to things that give them a tangible sense of security, and firearms were a pretty good example of that."

 

Measures of the total size of the U.S. gun industry vary, but the firearms industry now generates roughly $12 billion a year in sales according to IBISWorld. First Research, a division of Hoover's, puts the figure at $7 billion a year, with guns and ammunition each accounting for about half of the total. However large the global industry is, the U.S. clearly dominates it, serving as both the largest importer and exporter of small arms, according to the Small Arms Survey (pdf), an international research group based in Geneva, Switzerland. That group estimated in August that the global market for "authorized international transfers of small arms, light weapons, their parts, accessories, and ammunition" has grown to at least $8.5 billion a year, more than double the $4 billion estimate from 2006.


The NSSF says the industry's domestic economic impact goes far beyond just the sales totals for guns and ammunition. In a report released earlier this year, the group estimated that the firearms industry contributed $13.6 billion in direct economic impact in 2011, up from $6.8 billion in 2008. "The economic growth America’s firearms and ammunition industry has experienced over the years has been nothing short of remarkable," the report said. Including suppliers, taxes paid and other related effects, the NSSF put the industry’s total economic impact last year at nearly $32 billion.


"During difficult economic times and high unemployment rates nationally, our industry has grown and created over 26,325 new, well-paying jobs over the past two years," the report said. "Our industry is proud to be one of the bright spots in this economy." Overall, according to the NSSF, U.S. companies that make, distribute and sell firearms employed as many as 98,752 people in 2011 and were responsible for another 110,998 jobs in "supplier and ancillary industries."


The U.S. gun and ammunition industry overall includes about 300 companies, according to First Research. All told, the companies make more than 6 million guns a year. "Handguns are growing as a percentage of overall U.S. gun production," a recent First Research report noted. Pistols and revolvers made up about half the guns manufactured in the U.S. in 2011, up from about a third in 2001. "Total U.S. gun production more than doubled over the same period," the report notes. Rifles now account for about 35% of guns made in the U.S., with shotguns and other firearms represent the remaining 15% or so.


There may be hundreds of gun manufacturers, but a small number of fairly well-known names dominate the industry. Those companies -- and their shareholders -- have, by and large, done well in recent years, even as they struggled to keep up with demand and a backlog of orders. Sturm, Ruger & Co. (RGR), the largest publicly traded gun manufacturer in the U.S., saw net sales jump from $181.5 million in 2008 to $328.8 million last year. Profits soared from about $8.7 million to more than $40 million over that time. Little wonder, then, that the stock was up about 700% from Obama's inauguration until the day before the Newtown shooting. 


Shares of another gunmaker, Smith & Wesson Holding Corp. (SWHC) gained 289% over that same period, as net sales rose from $335 million in its fiscal year ending April 30, 2009, to $412 million in fiscal 2012.


A somewhat less familiar name, privately held Freedom Group, has been a growing force in the industry since its owner, private equity firm Cerberus Capital Management, first bought Bushmaster Firearms in 2006. The investment firm went on to roll up a host of gun brands, including rifle-maker Remington Arms, under the Freedom Group name. Freedom Group reported net sales of $677 million for the first three quarters of 2012, up from $565 million for the same period last year. Under pressure from the California State Teachers' Retirement System (CalSTRS), a major investor, Cerberus announced Tuesday that it would sell Freedom Group.


As the Cerberus move shows, the industry now faces new pressures after the Newtown shootings. Yet even before the tragedy, gunmakers faced pressures like lower government spending and the winding down of our wars that Samadi of IBISWorld expected would contribute to slower growth of 3.5% until 2017 -- a level that would still exceed projections for overall GDP growth. "Federal, state and local law enforcement agencies are projected to cut back on spending as stimulus funding dries up and budgetary constraints return," Samadi's report noted. Consumer demand would slow too, he projected. "As the economy continues to recover, fears about increased crime due to the recession and concerns about changes in gun laws will begin to subside, causing this segment's uncharacteristically fast growth rate to slow."


The irony may be that, if talk about gun control laws continues to grow louder, firearms makers should continue to see a rush in sales before any legislation takes effect.


Yuval Rosenberg is the Business+Economy editor at The Fiscal Times. Subscribe to The Fiscal Times' free newsletter.



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36Comments
Dec 20, 2012 11:38AM
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How about this idea. The constitution doesn't speak of "guns" it speaks of "arms". So, we should arm ourselves with F-16s and the like to equal the power of the government. The writers of the constitution were speaking of the weapons of the day which included, swords, guns, bombs and cannons. The individual is running far behind. How about a few drones as well! So the gun debate is really just a moronic way of keeping you in the box. Expand the debate and find out why the government wants so desperately to control  "guns". In local governments where we have not lost the personal connection to each other, this is not a problem.
Dec 20, 2012 10:55AM
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I think it was a Chris Rock bit - The guns should be free...but the bullets should cost $5,000 each.

 

HAHAHAHAHA

Dec 20, 2012 10:45AM
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The billionaires are buying up land and the stupid idiots are buying guns.I guess

Dick Cheney and Archie Bunker are their heros.

Dec 20, 2012 10:38AM
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My Olin stock has done fairly well (they own Winchester) and I expect it will continue to do so, people are scared, in our town avearge response time for emergency is 30 minutes. Mental health care is far from perfect but any is better than none, although most places will see you 6 months from yesterday maybe, kinda late, lock the barn door after the horse already ran away. I could write volumes on the horrors how psych patients get treated in emergency rooms, no wonder many refuse to go.........  There will forever be the wacko-s out there. I don't have firearms but in this nutty world I sure do like my pitbull...... more rules won't accomplish any more than prohibition did for booze, it'll just make more layers of regulations for Big Brother.....
Dec 20, 2012 8:44AM
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You are throwing your money away buying guns. The likely new Gun Law will prohibit multiple guns in personal possession. Assault weapons are named so for a reason. If you own one, you will be stating your intentions of use for it to a well-armed tribunal. Possessing ONE gun for protection and keeping caches of weapons in secured policed quarantine with permitted access makes a lot of sense. There are too many guns in the hands of weak and addle minded people and certainly the mentally ill have access to them because incidences like Newtown keep happening. A systemic processing on guns to have tracking identifiers, photo recognition and identification use and a flawless use permit process is the key. A bounty to turn in nut cases who hole-up instead of cooperating is important, as is finding out exactly how many weapons are in existence and managing the number to the population. People shouldn't have to fear guns, just nut cases with guns, and properly crafted legislation can help us with that.
Dec 20, 2012 8:31AM
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If the Government doesn't want you to have a gun, I can't think of any better reason to own a gun and if you don't have a gun then you better go buy one, learn how to use it and secure it.

 

The mother of the Newtown nut job, knowing her kid was mentally ill, did not secure her weapons.

 

 

Dec 20, 2012 5:48AM
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We have a horrible tragedy and 20 children are killed by a mentally deranged person. Our first response by the gun control lobby is to "change the constitution of the USA.  Yet just 18 trimesters ago these same 20 children could have been" legally" murdered. No one worries about that.

 34,000 people per year are killed in auto crashes and autos are not even a constitutional right but no one wants to ban cars. I could go on but I think you all get my drift.

Dec 19, 2012 11:46PM
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Just the thought of a government wanting to know who has or does not have guns encourages me to stock up. As Obama calls the problem complex or comprehensive, it means he will try to disarm this nation.
Dec 19, 2012 9:23PM
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Oakland Ca. just paid $200 for each gun returned. Great way to get rid of all your old junk guns and use the money to buy new working guns!!!

Dec 19, 2012 9:22PM
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Gun control will be held up for at least 2 more years. But, the O'rectalthermometer has got his toy idiot heading up the ol' rally to assault the constitution. Hopefully, when everybody calms down they can see mental health needs rebuilt after 30+ yr of neglect.
Dec 19, 2012 5:54PM
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Listen to the NRA, the country will be a lot safer when every Jethro has a gun,

or better yet a AK47.

Dec 19, 2012 4:15PM
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And will continue to do so...  Go try to buy something right now...  Long lines, some guns not even available demand is so heavy.  People are buying before any potential ban.  Magazines, which are normally plentiful are not to be found.  I would bet close to a 100,000 are being bough a day if you can find them.  

It is like the second coming of prohibition.  We don't learn from past stupidity.  There will be plenty of guns available, they cost will just be higher for the law abiding.

And not one tragedy will be prevented.  You have to be a complete moron to think otherwise.    But then again the joke Biden will be in charge...


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