Free Republic
Browse · Search
Topics · Post Article

Skip to comments.

Smith & Wesson Under the Gun: Loses $37.3m in Q2
The Truth About Guns ^ | Robert Farago

Posted on 12/10/2010 5:10:03 AM PST by marktwain

Bloomberg reports that Springfield, MA-based gunmaker Smith & Wesson lost $37.2 million in the second financial quarter. The company racked-up $96.3 million in total net sales in Q2, down $13.4 million or 12.2% from Q2 2010. Drilling down to the trigger-related bits, Smith’s Firearm Division clocked in with net sales of $83.6 million, down $9.8 million or 10.5%, from last year’s Q2 net sales of $93.4 million. As you’d expect, CEO Michael F. Golden downplayed the news . . .

“As overall purchasing of firearms moderated during the quarter compared with the record levels a year ago, total sales came in slightly below our previously issued guidance.” What’s more (or less), “The environment has become increasingly challenging, leading us to the decision to lower our revenue outlook.”

Click here to read the official statement. Meanwhile or alternatively, I’d like to draw your attention to three items.

First, Smith & Wesson sells FAR too many products. ome of the members of Smith’s ever-increasing family of firearms are not that great. Some don’t jibe within the public’s brand expectations. Their existence lowers perceived quality (threatening margins), increases consumer confusion and weakens the brand. The BODYGUARD series, in particular, is generally recognized to be two of the worst pistols Smith has ever made, with terrible triggers and serious quality concerns.

The gunmaker’s corporate masters don’t see it. Like pre-C11 GM, like a rat tapping a bar for an endless line of coke, Smith & Wesson is hooked on the thrill of the new. “Overall, new firearm products remain central to our focus,” Golden’s statement states. “We look forward to unveiling some exciting new models and product line extensions next month at the SHOT Show.”

Smith doesn’t need new products. It needs less products. And it needs to sell a small selection of its world famous wheelguns to non-gun owners. To paraphrase Cambell’s soup ads, “It’s amazing what a revolver can do.” A revolver.

Second, like a pre-C11 GM, Smith & Wesson doesn’t underdstand that there’s no such thing as a core brand. There is a brand. And that brand, Smith & Wesson fans, is firearms. Period. The company’s decision to buy a perimeter security company will end in tears, either by tanking (as it shows signs of doing) or distracting the corporate big-wigs from the business of making guns.

We also remain confident in our business strategy to expand beyond firearms, and we are committed to tapping into the long-term potential of the large and expanding perimeter security market. After the close of the quarter, we successfully expanded our revolving line of credit from $60.0 million to $120.0 million.

See the problem? Which mouth gets fed? And what happens to the passion that informs the Smith brand as factions within the company fight for resources?

Speaking of which, Smith is spending $9m+ to “relocate” Thompson/Center Arms from Rochester, New Hampshire to Springfield, Massachusetts. This for “increased operational efficiencies through the optimization of the company’s manufacturing footprint and increased synergies generated in fixed, marketing, and administrative costs.”

Translation: Thompson/Center Arms will now be a Smith & Wesson sub-brand. Whether they know it or not, they’re euthanizing the blackpowder brand’s vibrant corporate culture. Check this from the Thompson website:

Our precision investment castings come from our own casting facility here in Rochester, Thompson Investment Castings. T/C’s dedication to giving shooters and hunters their best product value begins with the T/C employees. More often than not, T/C employees use T/C products when they head into the fields and woods… products they (and you) can rely on, year after year.

How many of those T/C employees are moving to Springfield? What are the odds that Smith corporate drones will let them take a little time off to go huntin’? Anyway, thing three:

Total company operating expenses, including the $39.5 million expense related to the non-cash USR asset impairment [re: the perimeter security company] and the $3.3 million of expenses related to DOJ and SEC matters, totaled $65.1 million, or 67.6% of sales, for the second quarter of fiscal 2011 versus operating expenses of $23.4 million, or 21.4% of sales, for the comparable quarter last year.

Never mind the write-off, we learn that the DOJ and SEC case against Smith & Wesson for violating the Foreign Corrupt Practices Act (FCPA) lingers. Click here for the gov’s investigation. To refresh your memory on the potential fallout in Springfield, here’s the key excerpt from S&W’s last annual report:

If the SEC determines that we have violated federal securities laws, we may face injunctive relief, disgorgement of ill−gotten gains, and sanctions, including fines and penalties, or may be forced to take corrective actions that could increase our costs or otherwise adversely affect our business, results of operations, and liquidity. We also face increased legal expenses and could see an increase in the cost of doing business. We could also see private civil litigation arising as a result of the outcome of this inquiry. In addition, responding to the inquiry may divert the time and attention of our management from normal business operations. Regardless of the outcome of the inquiry, the publicity surrounding the inquiry and the potential risks associated with the inquiry could negatively impact the perception of our company by investors, customers, and others.

Never mind outside perception. The damage to Smith & Wesson internally could be enormous. Remember: culture eats strategy for lunch. If a corporate culture fails, its strategies are doomed. Hey, whatever happened to that nice little revolver company?

TOPICS: Business/Economy; Culture/Society; Extended News; News/Current Events
KEYWORDS: banglist; bodyguard; gun; smith; thompson
Navigation: use the links below to view more comments.
first previous 1-2021-4041-48 last
To: marktwain

Speaking of which, Smith is spending $9m+ to “relocate” Thompson/Center Arms
from Rochester, New Hampshire to Springfield, Massachusetts.

Have the “suits” at Smith and Wesson never heard of Texas, Florida,
or even Oklahoma and Louisiana?
Moving into Taxachusetts is going to get discussed in graduate business
schools in the future as a prime case study in “corporate suicide”.

H-LL, talented but low-IQ athletes know enough to leave economic taxation hell-holes
like California for Texas and Florida!!!

41 posted on 12/10/2010 10:16:36 AM PST by VOA
[ Post Reply | Private Reply | To 1 | View Replies]

To: Tijeras_Slim

What you said.....agree 100% !

Albeit my Smolt / Smython collection is growing I love S&W wheel guns.

Stay Safe....Merry Weekend Slim !

42 posted on 12/10/2010 10:25:27 AM PST by Squantos (Be polite. Be professional. But have a plan to kill everyone you meet)
[ Post Reply | Private Reply | To 26 | View Replies]

To: pabianice
There are just so many guns people can add to their stock.

Heretic! ;)

43 posted on 12/10/2010 10:30:25 AM PST by Tijeras_Slim (Pablo lives jubtabulously!)
[ Post Reply | Private Reply | To 36 | View Replies]

To: Squantos

Stay safe!

44 posted on 12/10/2010 10:35:09 AM PST by Tijeras_Slim (Pablo lives jubtabulously!)
[ Post Reply | Private Reply | To 42 | View Replies]

To: caver

I like the AR-15-22 really well. I’ve put about 500 rounds thru it with a couple of jams at first. I attribute that to breaking in. No jams in the last 4 or 5 magazines.

For sighting, I have an EOtech and out to 100 yards, I’ll hit you in the head every time - calm wind of course !!

I only shoot CCI Mini-Mag 22LR thru it. It’s a good round.

Price is right.

45 posted on 12/10/2010 2:16:09 PM PST by airdalechief
[ Post Reply | Private Reply | To 17 | View Replies]

To: Roklok
S&W makes good revolvers, but their autos are a POS.

Which auto do you own?

I've been nothing but impressed with my M&P40

The Sigma series is just made for a down market that competes with Hi-Point and the like.

46 posted on 12/10/2010 2:46:50 PM PST by Last Dakotan (Hunting - the ultimate in organic grocery shopping.)
[ Post Reply | Private Reply | To 34 | View Replies]

To: Last Dakotan

A decade ago I won a 457 at a match...couldn’t sell that POS fast enough. About five years ago I gave the S&W1911Sc a try. Then another. Then I switched to M&P pistols for carry. Then I started buying their ARs. More recently bought the MP-15 .22 rifle. (Nothing but fun!) I’ve certainly done my part!

I think the author of the piece nailed it...they’re leaving their core competency.

47 posted on 12/11/2010 1:11:14 PM PST by IGOTMINE (1911s FOREVER!)
[ Post Reply | Private Reply | To 46 | View Replies]

To: airdalechief

Cool! I seen one at a big gun show for something like $469.00. That didn’t sound like a bad price?

48 posted on 12/11/2010 3:32:49 PM PST by caver (Obama: Home of the Whopper)
[ Post Reply | Private Reply | To 45 | View Replies]

Navigation: use the links below to view more comments.
first previous 1-2021-4041-48 last

Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.

Free Republic
Browse · Search
Topics · Post Article

FreeRepublic, LLC, PO BOX 9771, FRESNO, CA 93794 is powered by software copyright 2000-2008 John Robinson