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Tariff a problem for the manufacturer of Smith & Wesson guns



The company reported weaker-than-expected earnings on Thursday due to a fall in gun sales. It also warned investors that it will earn $ 5 million in revenue in the second half of the fiscal year due to the impact of tariffs from the escalating US-China trade war.

The tariffs will mostly affect its outdoor products – hunting and fishing equipment that make up more than a quarter of sales. Many of these products are manufactured in China, and the company warned that there are few alternatives other than paying the tariff costs when they come into effect this year.

"As the customs situation continues to escalate, opportunities to offset that impact have begun to wane rapidly," says CEO James Debney in a conversation with investors Thursday. "Our supply chain in China is relatively sophisticated compared to the one available in other low cost countries, so a quick change is difficult. In addition, it takes a long time to bring a brand new manufacturer online, and the duration of the tariff is still very unclear. "

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"Without that impact, we believe earnings per share would be within our last policy, but tariffs are now making this result unlikely," said CFO Jeffrey Buchanan.

The company did not disclose how much firearms were produced in China, even It said the business was facing the separate problem of softer gun sales across the industry, the company's handgun shipments fell 7% in the quarter, and long-range rifle shipments dropped 8%, much of which was due to campaigns it did at the end of the last quarter which increased shipments during that period, but increased tea sales in the recent period.

Weapons sales have been down consistently for the nearly three years since President Donald Trump was elected. Fear from gun enthusiasts that gun control measures would be implemented has waned since the 2016 election, reducing the demand for weapons that was very strong under President Barack Obama.
Lower gun sales and revenue for the quarter, combined with reduced revenue guidance for the rest of the year, sent shares of American Outdoor Brands ( AOBC ) down 12% in morning trading Friday After the report.

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