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Four trends shaping the gun industry

BusinessFour trends shaping the gun industry

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People fire an assortment of guns at the annual Machine Gun Shoot sponsored by Shooters Gauntlet on June 03, 2023 in Monroe, Pennsylvania. The shoot, which has been held since 2016, lets gun enthusiast and others shoot machine guns at targets in a controlled and secure wooded location.

Spencer Platt | Getty Images

The gun industry is finding its footing after a post-pandemic sales slump forced some of the largest manufacturers to roll back production.

In July, Americans bought an estimated 1.19 million guns, down 17% from the previous July, according to FBI data analyzed by gun watchdog site The Trace.

However, while fewer firearms are being sold across the U.S, the business is still profitable as manufacturers adapt to meet changing consumer demand, develop a new generation of weapons, and employ marketing strategies that increasingly resonate with younger, more diverse consumers.

Gun makers, in turn, such as Smith & Wesson and Sturm, Ruger & Company have seen their declines stabilize. Smith & Wesson shares are up about 40% so far this year, while Sturm, Ruger is up 2%.

They’re assuring investors that their business models have weathered the slowdown and that a handful of positive trends will help the industry rebound.

Here are four trends that are shaping the gun industry today:

Market normalization

Several companies in the gun market are slowing down production and slashing prices as they combat material cost increases and waning demand for their weapons.

During the pandemic, more Americans than ever purchased firearms. In 2020, at the height of the sales boom, new gun ownership rates hit a record 21 million, according to trade group National Shooting Sports Foundation. NSSF uses FBI data and background checks to estimate new gun ownership rates.

However, by 2022, feelings of insecurity and instability experienced by many Americans amid the pandemic subsided, and so did the surge in firearms sales. Gun purchases that year fell to 16.4 million, which is more akin to pre-pandemic numbers.

“The industry’s bottomed-out and has stabilized,” Aegis Capital analyst Rommel Dionisio told CNBC.

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Smith & Wesson, the country’s largest firearms manufacturer by revenue, reported fourth quarter net sales of $144.8 million, a 20% decrease from comparable quarter last year.

On a conference call with investors, CEO Mark Smith said the company is “adjusting production rates to match normalizing demand patterns.” Smith added that “focused consumer promotions” have helped the company maintain its leading market share and retain profits.

In its most recent earnings report, Sturm, Ruger & Company reported flat sales for its second quarter amid softening demand for some of its most popular product categories like its polymer pistols.

However, the company’s bottom line during the second quarter, while down from the prior-year period, improved from the first quarter.

CEO Christopher J. Killoy said the company will “continue to adjust our level of production and product mix to better align our output with current, and expected, consumer demand.”

“It’s not really going down from here,” Aegis Capital’s Dionisio said. The industry, if anything, may even begin to ramp up production if there’s another surge in demand brought about by the 2024 presidential election. Gun sales typically see a spike during presidential elections, Dionisio added.

Smart guns

The next generation of firearms appear to be on the horizon: lightweight, cost-effective weapons that incorporate advanced technology and some safety features.

Gun startups like Biofire Technologies are leading the charge with its 9mm handgun handgun that utilizes facial recognition and fingerprint verification technology to operate. CEO and founder Kai Kloepfer said the smart-gun, which is the first to come to market after years of failed attempts by other companies, can help reduce accidental firings and suicides.

“When you pick the firearm up, it uses either your fingerprint or your face to unlock, so only an authorized user can fire it,” Kloepfer told CNBC.

Kloepfer said thousands have already placed preorders online, with some models selling out. Biofire said it cannot share specifics around the volumes produced since it is somewhat “sensitive competitively.”

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Their guns retail between $1,499 and $1,899. When they ship in December, they’ll become the first smart guns to enter U.S. circulation. Investors in Biofire include venture capitalist Ron Conway and Peter Thiel’s Founders Fund

Biofire’s smart gun comes as gun manufacturers increasingly look for different materials and technologies to make their products more appealing to consumers.

Mark Oliva, an executive at the National Shooting Sports Foundation, said red dot sights have become a popular accessory among consumers in recent years.

An alternative to the more traditional iron sight, which requires shooters to look through an optical telescope for aim, red dot sights project a small light directly onto a target.

“My eyes aren’t getting any better,” said Oliva, “so I’m one of the people who’s switched over to using a red dot sight on my handgun.”

Oliva also said the industry is turning towards more lightweight materials such as polymer to make slimmer, more durable guns that are cheaper than metal or steel alternatives. These days, said Oliva, polymer can be found in every type of modern firearm, including those produced by startup Biofire.

Anti-firearm violence nonprofit Everytown for Gun Safety sees the positive potential in smart guns.

“Smart guns can ensure that guns are accessible by their owners and no one else,” said Nick Suplina, senior vice president for law and policy at Everytown, who has tested Biofire’s smart gun. “Gun manufacturers now have a viable road map for innovating towards safety — and it’s on them to act.”

Changing demographics

The pandemic-era sales boom for firearms showed the face of gun ownership in the U.S. is changing.

Of the 7.5 million Americans who bought guns for the first time between January 2019 and April 2021, half were female, a fifth were Black, and another fifth were Hispanic, according to a study by Matthew Miller, a professor of health sciences and epidemiology at Northeastern.

By contrast, gun owners overall are 63% male and 73% white, the study found.

Another study by NORC at the University of Chicago noted similar trends.

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First-time gun purchasers during the pandemic, according to the study, were younger than previous, pre-pandemic U.S. gun owners.

Eighty-six percent of first-time gun buyers during the pandemic were younger than 45. Prior to the pandemic, 41% of all gun owners were under 45, according to NORC. The group began tracking this data in March 2020.

“The idea that gun owners are only old, male and pale isn’t holding true,” NSSF’s Oliva told CNBC. “Today’s gun buyers are more representative of America.”

Self protection

Gun owners are increasingly ranking personal protection as the top reason for buying a firearm.

Nearly three-quarters of U.S. gun owners cited protection more than any other factor as the main reason they own a gun, according to a 2023 Pew Research center survey.

The survey found respondents cited other factors such as hunting and sport shooting at 30% and 32%, respectively.

In 2017, when the survey was last conducted, 67% of respondents cited protection as a major reason for owning a firearm.

This increase is consistent with how gun culture has evolved over the last few decades, according to a 2020 survey by online academic journal Palgrave Communications.

Many manufacturers, especially amid the social upheaval experienced within the U.S. over the last few years, have moved away from themes of hunting and recreation to advertise their guns, and have instead leaned into themes of personal protection and self defense to reach consumers.

“Although we recognize the continuing existence of various subcultures of guns in the U.S., these changes suggest the movement of self-defense to the core of American gun culture today,” authors for the study said. “With this shift, previously dominant subcultures like hunting and recreational target shooting have become more marginal.”

This is also consistent with what types of guns have risen in popularity. Oliva said he’s been seeing gun buyers gravitate towards handguns, such as semiautomatic pistols or “glocks,” which are more compact, easily concealed and designed for self defense.

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