What happened

Firearm marketplace and accessory supplier Ammo (POWW 1.76%) reported quarterly sales that came in below expectations and lowered full-year guidance. Investors were disappointed, sending shares down as much as 30% on Tuesday morning.

So what

Ammo has two primary businesses. The company is the owner of GunBroker.com, an online marketplace for the shooting sport industry, and is also a manufacturer of ammunition and other firearm components.

In its fiscal second quarter ending Sept. 30, the company reported adjusted earnings of $0.05 per share, slightly ahead of the $0.04-per-share consensus, but revenue of $48.3 million was well below the $63 million Wall Street had expected. Net revenue fell 21% from the same three months of 2021, due in part to production restraints at its new manufacturing facility.

CEO Fred Wagenhals said in a statement:

Our new plant is running smoothly, and we are diligently working to bring it to its full operational production capacity, to meet commercial demand and satisfy the understandably stringent technical and timeline requirements set out by our U.S. military partners. Additionally, we continue on our charted path to strategically and continually optimize the GunBroker.com marketplace to ensure it fully addresses our customers' needs while leveraging that amazing platform to drive more revenue and increase earnings quarter over quarter.

Ammo is also facing higher commodity and freight costs and had some one-time expenses in the quarter related to a proxy battle against a dissident director.

Now what

Ammo also lowered its full-year fiscal 2023 revenue forecast to $220 million to $240 million, well below the $295 million Wall Street consensus estimate. That suggests the revenue shortfall was not totally tied to getting the new manufacturing facility up and running, but rather a reflection of broader demand trends as well. The cost headwinds are likely to continue, and demand is uncertain.

The question for investors is how long these conditions will linger. For now, there doesn't seem to be a clear path for a quick turnaround, and investors are fleeing the stock as a result.