by Joseph P. Tartaro | Executive Editor
Sports Authority filed for bankruptcy on March 2, saying it will close 140 of its 450 stores nationwide, but did not disclose any of the locations which it will be closing over the next few months.
The bankruptcy has been looming since January, when the company disclosed that it had missed a $20 million debt payment.
This may be good news for some of the store’s regular customers, who will be taking advantage of major discounts available in the liquidation sales. However, industry suppliers for Sports Authority, which plans to continue operation of its online outlet, will not be happy. According to some business reports, a few of those suppliers have already scaled down their own sales expectations.
According to Bloomberg News, the Sports Authority bankruptcy news rippled through the sporting-goods industry with companies saying it was creating both hardships and opportunities.
Dick’s Sporting Goods Inc. said it would try to pick up market share ceded by its longtime rival.
Sports Authority was once the largest sporting-goods retailer in the US and its decline has broad repercussions. In addition to going after the chain’s customers, Dick’s may scoop up real estate vacated by the bankrupt business. Dick’s Chief Executive Officer Edward Stack said on a conference call with Bloomberg reporters that his company would be looking at Sports Authority leases to see which ones would make sense.
Dick’s said about 100 of its locations overlap with the 140 stores that Sports Authority will shutter and that it will spend more on labor and marketing in those areas to take advantage of the market gap. In the short term, the Sports Authority closings will actually hurt nearby Dick’s stores. That’s because liquidation sales will flood the market with discounted merchandise. But Dick’s should start to benefit in the second half of this year and 2017, the company said.
On the brighter side of business news are financial reports from two of the biggest publicly-traded gun and accessories companies—Sturm Ruger and Smith & Wesson, both of which reported higher sales and earnings in their financial statements.
Ruger reported that for 2015 year the company had net sales of $551.1 million and fully diluted earnings of $3.21 per share, compared with net sales of $544.5 million and fully diluted earnings of $1.95 per share in 2014. In the fourth quarter of 2014, the Company recorded an expense of $41.0 million related to the termination and settlement of its defined-benefit pension plans. Excluding this expense, 2014 fully diluted earnings were $3.22 per share.
For the fourth quarter of 2015, net sales were $152.4 million and fully diluted earnings were 88¢ per share. For the corresponding period in 2014, net sales were $122.6 million and the company realized a fully diluted loss of 77¢ per share. Excluding the aforementioned defined-benefit pension-plan expense, fourth quarter 2014 fully diluted earnings were 53¢ per share.
Ruger CEO Michael O. Fifer made a number of observations related to the company’s results, indicating that the firearms industry has become reinvigorated after a slight slowdown in 2014 off the pace it has enjoyed through much of the Obama administration.
After a year of declining demand in 2014, customer demand rebounded in 2015 to slightly higher levels and followed typical historical seasonal patterns. Ruger inventory was down in the fourth quarter at both the Company and at the independent distributors, supporting Ruger’s assessment of improving demand.
Fifer noted that the National Instant Criminal Background Check System (NICS) (as adjusted by the National Shooting Sports Foundation) increased 9% in 2015 from 2014.
He said new products represented $115.4 million or 21% of firearm Ruger sales in 2015, compared to $89.4 million or 16% of firearms sales in 2014.
Smith & Wesson Holding Corporation, parent for Smith & Wesson firearms, announced higher than expected sales and earnings for the third quarter of its financial year, which Jan., 2016.
Some of the highlights of that report:
- Quarterly net sales were $210.8 million, an increase of 61.5% over the third quarter last year. Firearms division net sales of $194.7 million increased by 56.4% over the comparable quarter last year. Accessories division net sales were $16.1 million, compared with $6.1 million for the comparable quarter last year, a period in which the company acquired Battenfeld Technologies, Inc. (BTI) and therefore reported only six weeks of accessories division sales.
- Gross margin for the quarter was 41.1% compared with 33.6% for the comparable quarter last year.
- Quarterly GAAP net income was $31.4 million, or $0.56 per diluted share, compared with $8.1 million, or $0.15 per diluted share, for the comparable quarter last year. Third quarter 2016 GAAP net income per diluted share included an expense of $1.7 million for amortization, net of tax, related to the BTI acquisition. The increase in net income over the comparable quarter last year was a result of increased revenue, favorable fixed-cost absorption, and lower acquisition related expenses, partially offset by increased profit related compensation accruals and additional intangible amortization expense as a result of the BTI acquisition.
- Quarterly non-GAAP net income was $33.2 million, or $0.59 per diluted share, compared with $11.2 million, or $0.20 per diluted share, for the comparable quarter last year.
James Debney, Smith & Wesson Holding Corporation president and CEO, said, “The combined strength of our firearms and accessories businesses delivered an exceptional performance, driven by healthy consumer demand across our growing portfolio of firearm and outdoor lifestyle offerings. During the third quarter, the Adjusted National Instant Criminal Background Check System (NICS) data, which serves as an indicator of consumer purchases, reported a significant increase in growth versus the prior year, especially in handguns.”
Needless to say, the successes of both Ruger and S&W are directly attributable to the general public’s anxiety over threats to their firearms rights posed by the Obama administration, coupled with the anti-gun rhetoric of Democrats Hillary Clinton and Bernie Sanders, and growing concerns about the prospects or more terrorist attacks on US soil.
