Considering the dark gray clouds that hung over the firearms industry for the better part of 2017, it may be surprising to learn that Sturm, Ruger (NYSE:RGR) had a pretty good year.

Although firearms sales tumbled 20% over the first three quarters, helping to send American Outdoor Brands' (NASDAQ:SWBI) down 34% in the same period, Ruger's stock gained 6% for the year, whereas its rival lost 40% of its value. Doing even worse was the owner of Savage Arms and Federal Premium ammunition, Vista Outdoor (NYSE:VSTO), which saw its stock plunge 60% in 2017.

RGR Chart

RGR data by YCharts

Certainly Ruger was affected by the same trends that hurt its rivals, primarily the decrease in consumer demand, at least in relation to the outsize demand the industry benefited from in 2016. But it was also affected by retailers who reduced their purchases, as their inventories remained flush with stock.

Holding the line on pricing

CEO Chris Killoy estimated that Ruger's unit sell-through of its firearms from independent distributors to retailers decreased 25% in the third quarter and by 16% over the nine-month period ended Sept. 30 from the year-ago period.

However, while the competition became exceptionally promotional as demand fell, Ruger, which also participated in discounting, said it wasn't nearly as aggressive in the practice as its rivals were. It also didn't have to offer its customers better repayment terms, meaning it's able to operate from a position of strength.

One of the reasons Ruger was able to hold the line was the continued popularity of the new firearms it introduces to the market. New product sales are those from firearms that were introduced in the past two years. Last year it had three guns that fell under that classification -- the Mark IV pistols, the new Precision Rifle, and the LCP II pistol, a firearm designed specifically for the concealed-carry market. Sales of new products accounted for 30% of total revenue over the first three quarters, or $118 million, though Ruger did have a problem with accidental discharges on its Mark IV, which led the gunmaker to issue a total recall of the weapon.

Sturm, Ruger Mark IV pistol

Image source: Sturm, Ruger.

Staying on target

Overall, though, Sturm, Ruger remains a very financially strong company. While profits obviously get taken down in periods like this, its position looks demonstrably better than that of the competition. For example, although profit margin fell across the board, Ruger's net margin of 9% in the third quarter is substantially higher than the 2% margin American Outdoor Brands posted.

That comes from its unwillingness to partake in wholesale discounting of its product and introducing new firearms that can command a premium, even in a weak market.

Naturally, the industry's undulations will cause Ruger to rise and fall, and with the FBI's criminal background checks down 8% after a 19% run-up the year before, it's going to cause year-to-year gyrations in Ruger's business, as well as for its peers. Yet the gunmaker's decision to remain firm in not gutting the value of its brand, not diversify away from its primary firearms business, and continue focusing on conserving its strength till better times inevitably return has served it well.

2017 was a year to remember for Sturm, Ruger -- not so much for what occurred, but for what didn't happen. It didn't collapse as its rivals did, and though its shares are down from their 52-week highs, they also trade nearly 20% above its lows, which positions it well for the coming year.

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