Gunmaker American Outdoor Tumbles as China Tariffs Hit Forecast

(Bloomberg) -- American Outdoor Brands Corp. plunged as much as 22% in after-hours trading as the maker of Smith & Wesson firearms lowered its forecast for the fiscal year to include $5 million in costs for tariffs on Chinese imports. The stock hasn’t fallen that low in regular trading since 2012.

• Earnings for the year will be 70 cents to 78 cents a share, and no analyst had expected less than 81 cents in a Bloomberg News survey.

Key Insights

• While American Outdoor has tried to shift some manufacturing to other countries, their supply chains aren’t as sophisticated as China’s and the same components aren’t available, Chief Financial officer Jeff Buchanan said on a conference call. That’s a dilemma lots of U.S. manufacturers are facing amid President Donald Trump’s trade war -- do they invest in factories in other places or try to wait it out and hope for a truce with China?
• Profit and sales both fell short of analysts’ forecasts for the fiscal first quarter, with revenue down 11% from the year-earlier period, to about $124 million, the company said in a statement. The second quarter isn’t looking much better for the Springfield, Massachusetts-based gunmaker, with adjusted EPS projected to be no more than 7 cents a share -- far below the average estimate of 20 cents and again trailing even the lowest prediction.
• Firearm sales have been slow, though new products in the second half of the year should change that, Buchanan said. Gunmakers are finding more resistance from retailers as mass shootings in the U.S. make it tricky to sell firearms and ammunition. Dick’s Sporting Goods Inc. moved away from gun sales after last year’s school shooting in Parkland, Florida, and is continuing a review of its so-called hunt segment. Walmart Inc. faced renewed calls to stop selling guns and ammunition after an Aug. 3 mass shooting at one of its stores in Texas.

Market Reaction

• American Brands shares fell 15% to $6.49 at 6:48 p.m. in New York. They already dropped 40% so far this year through Thursday’s close.

To contact the reporter on this story: Kevin Miller in Chicago at kmiller@bloomberg.net

To contact the editors responsible for this story: Crayton Harrison at tharrison5@bloomberg.net, Kevin Miller, Jonathan Roeder

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