SPRINGFIELD, Mass., Sept. 4/ Smith & Wesson Holding Corporation (Nasdaq: SWHC), parent company of Smith & Wesson Corp., today announced financial results for its first fiscal quarter ended July 31, 2008.
Net product sales for the three months ended July 31, 2008 were $78.0 million, a $3.6 million, or 4.9%, increase over net product sales for the three months ended July 31, 2007.
Smith & Wesson Holding Corp. shares dropped Friday after the gun maker posted a big drop in its fiscal first-quarter profit and an analyst warned of near-term struggles as retailers wait for inventory to clear and demand to climb.
After the market closed Thursday, the Springfield, Mass.-based company reported net income of 5 cents per share – down from 11 cents per share earned in the same period last year. Analysts polled by Thomson Reuters were expecting 7 cents per share.
Firearms sales totaled $73.1 million, an increase of $3 million, or 4.2%, over the first quarter of last year. Gross margins decreased to 32.3% from 36.4% for the comparable period last year. Net income was $2.3 million, or $0.05 per fully diluted share, compared with $4.7 million, or $0.11 per fully diluted share, for the comparable period last year.
Pistol sales grew 18.4%. Sales of M&P pistols grew 27% in the first quarter. Walther products grew at a 19.9% rate based largely on the performance of the PPS sub-compact handgun, which was launched in mid-fiscal 2008.
M&P tactical rifle sales grew by 11.0% in the first quarter. Revolver sales grew by 3.4% over the comparable quarter last year.
Sales of non-firearms accessories, including handcuffs, totaled $4.9 million, a 15.1% increase over non-firearms accessories sales of $4.3 million in the first quarter last year.
Hunting product sales of $14.6 million represented a decline of $3.3 million, or 18.4%.
Michael F. Golden, president and chief executive officer, said, “Current economic conditions and their impact on consumer discretionary spending, combined with the continuing effect of industry inventory conditions related to hunting products, negatively influenced our otherwise positive results this quarter. In fact, excluding sales of hunting rifles, shotguns and related accessories, firearms revenue in the first quarter increased by 12.0%, or $6.3 million over the comparable quarter last year.
The negative impact of the current environment was evident in our long-gun sales in every hunting-related category, as well as in our gross-margin performance. Gross margins were impacted by long-gun product mix, a shift toward lower-margin products, and the impact of unabsorbed overhead resulting from reduced production volumes in our New Hampshire manufacturing facility. Gross margins were also impacted, although to a lesser degree, by ongoing consumer pull promotions related to our handguns.”
Golden continued, “Our first-quarter results reflect the continued, successful penetration of our handgun products throughout all of our sales channels, including consumer, international, law enforcement and federal government. Our M&P products continue to fuel this growth, and were responsible for winning a number of law enforcement and international orders during the first quarter. In addition, our M&P pistols were selected this quarter by a major agency within the Department of Defense. To date, our M&P pistols have been selected by 402 law enforcement agencies, and are winning at a rate of over 80% of all contests in which they compete. Tactical rifles, which also led our growth this quarter, have now been selected by 185 law enforcement agencies and are winning at a rate of over 90% in all contests in which they compete. We exited the first quarter with a strong backlog in both our pistols and in our tactical rifles.”
Operating expenses in the first quarter of fiscal 2009 were $19.1 million, or 24.4% of sales, versus $17.4 million, or 23.2% of sales in the first quarter of the prior year, representing a $1.7 million increase. The bulk of the increase was due to advertising expenses, and the balance was attributable to new product development and incremental FAS 123R, or stock-based compensation expense. As a result, income from operations was $6.2 million for the first quarter of fiscal 2009, a $3.6 million, or 36%, decline versus operating income of $9.8 million in the same quarter last year.
