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Why Shares of American Outdoor Brands Are Plunging Today

By Lou Whiteman - Updated Mar 6, 2020 at 10:49AM

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Quarterly results came in weaker than expected, and guidance gave little reason to get excited.

What happened

Shares of American Outdoor Brands (SWBI -0.38%) fell more than 35% on Friday after the firearms and sporting goods manufacturer delivered weaker-than-expected quarterly results and provided tepid guidance. On a down day for markets, the company's commentary sent investors rushing for the exits.

So what

American Outdoor Brands reported adjusted fiscal third-quarter earnings of $0.13 per share on revenue of $166.7 million, falling well short of analyst expectations for $0.23 per share in earnings on sales of $187 million. The company actually got a $10 million sales benefit in the quarter from a change in the timing of its federal excise tax assessment.

The company blamed the shortfall on lower-than-anticipated orders from certain retailers across firearm categories, and the bankruptcy or financial distress of some retail customers.

A handgun and bullets.

Image source: Getty Images.

Shares of American Outdoor Brands have been under pressure for some time now due to anemic demand for firearms and efforts by some large retailers to restrict firearms sales. The company, best known for the Smith & Wesson brand, has also been in the process of streamlining distribution with a new centralized facility in Missouri.

American Outdoor Brands said in November that it would separate its firearms business from its outdoor products and accessories unit, giving the stock a short-term boost.

But the company still sees difficult market conditions in the months to come. It expects adjusted earnings of $0.33 to $0.37 per share in its fiscal fourth quarter, short of the $0.45 consensus.

Now what

Firearm sales typically increase during an election year, and early indications from the federally run National Instant Criminal Background Check System would suggest that demand should be on the rise in the months to come. But American Outdoor has a lot on its plate right now, and the guidance indicates that any turnaround will not materialize quickly. It's no surprise investors are retreating from the shares after those results.

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