Smith & Wesson Brands (SWBI 2.37%), a manufacturer of firearms and related products, released its results for the first quarter of fiscal 2026 on September 4, 2025. Revenue (GAAP) declined by 3.7% year-over-year to $85.1 million, compared to management's earlier comment that the first quarter could be approximately 10% lower than last year. However, margins tightened as gross margin fell to 26.0% (Non-GAAP), down from 29.3% in Q1 FY2025. Adjusted EBITDAS margin also compressed to 9.5% from 11.8%. Both GAAP and Non-GAAP diluted earnings per share (EPS) showed a larger loss than the prior year, at $(0.08) per share compared to a loss of $(0.04) and $(0.02), respectively. The company maintained its $0.13 per share dividend. Overall, the period showed better top-line resilience than feared, but ongoing margin compression and losses highlighted persistent market and cost pressures.
| Metric | Q1 FY2026(ended July 31, 2025) | Q1 FY2025(ended July 31, 2024) | Y/Y Change |
|---|---|---|---|
| EPS (Non-GAAP, diluted) (GAAP) | N/A | N/A | N/A |
| EPS (Non-GAAP, diluted) (Non-GAAP) | $(0.08) | $(0.02) | -300.0 % |
| Revenue (GAAP) | $85.1 million | $88.3 million | (3.7 %) |
| Revenue (Non-GAAP) | $85.1 million | $86.7 million | (1.8 %) |
| Gross Margin (Non-GAAP) | 26.0 % | 29.3 % | (3.3 pp) |
| Adjusted EBITDAS Margin (Non-GAAP) | 9.5 % | 11.8 % | (2.3 pp) |
Business Overview and Strategic Priorities
Smith & Wesson Brands is one of the United States' oldest and most recognized manufacturers of firearms. Its core business is the design, production, and sale of handguns, long guns (like rifles), and related accessories marketed under the Smith & Wesson and Gemtech brands. The company sells primarily to shooting sports enthusiasts, law enforcement agencies, professional users, and specialty retailers.
In recent years, Smith & Wesson has focused on several priorities. Product innovation has been central, with new product development and enhancements to core lines such as Performance Center products and modern sporting rifles. Managing regulatory compliance, improving operational efficiency, leveraging its well-known brand, and maintaining disciplined capital allocation have also shaped its strategy. Success depends on introducing compelling new firearms and accessories, smoothly navigating strict regulations, optimizing manufacturing and supply chains, and effectively deploying capital stewardship including dividends and periodic buybacks.
Key Developments in the Quarter
During the first quarter of fiscal 2026, Net sales (GAAP) of $85.1 million were down just 3.7% from the prior year, outpacing management’s earlier outlook of a 10% decline. This outcome was driven by robust demand for new products and an uptick in retail sell-through, especially as distributor inventory levels dropped more than 10% compared to the prior quarter. Management stressed, “Q1 FY2026 results came in better than expected, reflecting robust demand for our new products and continued strong market share.”
Despite this, profitability continued to face challenges. Gross margin (non-GAAP) declined by 3.3 percentage points to 26.0%. Adjusted EBITDAS margin fell to 9.5%. The result was a widened net loss. Diluted loss per share reached $(0.08) (GAAP), double the year-ago period's loss. Operating cash flow (GAAP) improved, with net cash used in operating activities narrowing to $(8.1) million from $(30.8) million in Q1 FY2025.
New product launches remained a bright spot. New firearms made up 37.3% of sales, underscoring the company’s continued focus on product development—though this figure represented a step down from the prior quarter. Smith & Wesson’s recent launches have included modern sporting rifles and specialty handguns, keeping its brand presence strong even in a tough demand environment. Research and development investment rose to $3.0 million, up approximately 19.6% from the prior year.
Channel inventory management delivered operational benefits. Distributors reduced stock by over 13% year-over-year. However, internal inventory (GAAP) increased to $203.1 million in line with normal seasonal trends. The risk remains if retail demand underperforms in future quarters.
Smith & Wesson again maintained its quarterly dividend at $0.13 per share, continuing a streak of capital returns. The company did not execute any stock repurchases. Borrowings rose to $94.1 million, up from $79.1 million in the last quarter, a trend consistent with seasonal cash needs but one to watch should free cash flow not rebound in future quarters.
Looking Ahead: Guidance and Watch Points
For the upcoming quarter, management guided for a sequential rise in sales. It expects second quarter sales will be significantly higher than in the first quarter, landing about 3 to 5 % below the same quarter last year. No specific margin or profit forecasts were provided.
With industry risk factors still in play, investors should monitor inventory levels and margin trends closely. The company’s outlook hinges on seasonal demand materializing and no disruptive changes in the regulatory environment. Smith & Wesson continues to highlight new product development, retail channel health, and cost management as critical areas for the year. The quarterly dividend was unchanged at $0.13 per share.
Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.
