Why The Firearms Industry Is Suffering A Downturn
ARI SHAPIRO, HOST:
The gun-maker Remington Outdoor Brands is seeking Chapter 11 bankruptcy protection. The 200-year-old company says it's not going out of business but using Chapter 11 to restructure its debt. Remington's announcement comes as the U.S. firearms industry is generally in a slump. Polly Mosendz covers the industry for Bloomberg News. Welcome back to the program.
POLLY MOSENDZ: Thank you for having me.
SHAPIRO: What is it that's pushing Remington into bankruptcy after 200 years?
MOSENDZ: Well, the biggest thing that's pushing it is nearly $1 billion - with a b - in debt. That's really the biggest thing underwriting this. Even a company in the best of circumstances, when it has a billion dollars in debt, it's going to be hard to operate - especially when you consider the current state of the firearms market.
SHAPIRO: Tell us about the current state of the firearms market.
MOSENDZ: Well, basically they're in a slump. When there is a Republican president in power and a Republican Congress, you don't have the same fear-based buying that we've became accustomed to under the Obama administration. There is no fear that gun control is going to happen. You know, we're not really seeing that in real terms right now. So you don't have people running out to gun stores to stock up for fear that these products will no longer be available. As a result, we have a slowness in sales and therefore a fall in the stocks.
SHAPIRO: So companies like Remington provided a lot of supply to gun retailers in anticipation that Hillary Clinton was going to win the presidency. What happened when Trump won?
MOSENDZ: Well, basically they were stuck with Hillary inventory. They assumed she was going to take power, and that meant there'd be a rush on the stories. There would be a line out the door at Cabela's. Everyone would be buying guns because maybe you couldn't get them any more. That was the fear. And that was really the anticipation in the market. That's how they were preparing. When that didn't happen, you have retailers that have pretty substantial inventories that they're not moving at the speed they thought they'd be moving them. As a result, they don't place reorders, so manufacturers suffer. And that's when their stock prices go down. That's when they have issues with cash flow. That's really the position that is very hard to be in for a retailer in any space but especially in the firearm space because it's so contentious.
SHAPIRO: So do you think we're likely to see other bankruptcies?
MOSENDZ: You know, I don't think it's necessarily so likely because this is still a product that's popular with the American public. This is still a product that sells even if it's not selling quite so quickly. And this is a product that is likely to see, you know, influence from politics. If Democrats are to take over in the midterm elections, or if there is to be a Democratic president in 2020, that might lead to another resurgence in sales. So I don't think we can look at Remington as an example for the rest of the firearms industry. There's plenty of other big companies, public and private, that are still holding their own.
SHAPIRO: What about the national dialogue surrounding gun safety right now - the huge protests that we saw over the weekend? Is that affecting these companies?
MOSENDZ: Well, not really at the end of the day - right? - because so many of their decisions are made on a quarterly basis. They have so many decisions that are even made on a year-long or two-year-long basis. And their clients aren't necessarily the people that are protesting. If you're somebody that really loves hunting, you're going to go out and buy that shotgun that you want to buy and buy ammunition no matter what. Those protests aren't necessarily going to influence you. It's also important to remember that even though we're seeing these big protests and this big social movement, we haven't actually seen a lot of change directly from Congress. It's not like we've seen an assault weapons ban being proposed. It's not like we've seen something that says the age of purchasing should actually go up to 21 and that Congress supports that move. So because of that, there - you know, we're seeing a lot of social movement. We're not really seeing a ton of political movement that could impact their bottom line.
SHAPIRO: Polly Mosendz covers the gun industry for Bloomberg News. She joined us via Skype to discuss Remington filing for Chapter 11 bankruptcy protection. Thanks so much, Polly.
MOSENDZ: Thank you.
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