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Monday, May 24, 2010

Obama Gun Boom Comes to an Official End

Posted: May 20, 2010 11:36 AM'

More proof that the great Obama gun-buying boom is coming to an end.

The Freedom Group, a "family" of gun companies cobbled together by Cerberus Capital Management (the former owners of Chrysler, among many other things), has just filed new documents with the Securities and Exchange Commission (SEC) in anticipation of a long-threatened stock IPO (Initial Public Offering). And the picture isn't pretty.

2010-05-19-freedomgroupcompanies.png

Freedom Group companies run the gamut from sporting arms to assault weapons. In addition to Bushmaster and DPMS (two leading manufacturers of AR-15 type assault rifles), companies and brands that comprise Freedom Group include: Remington, Marlin, Harrington & Richardson, New England Firearms, L.C. Smith, Dakota Arms, Advanced Armament Corporation, and Barnes Bullets. Freedom Group states that it has the number one U.S. market position in shotguns (31 percent), ammunition (33 percent), traditional rifles (37 percent), and "modern sporting rifles" (48 percent). And, of course, a really kick-ass name. The chart below detailing their market share and position is taken from Freedom Group's SEC filing.

2010-05-19-freedomgroup3.GIF

What's that you say? You've never heard of "modern sporting rifles"? Well, actually you have--except you probably know them as assault rifles. "Modern sporting rifle" is just the gun industry'slatest rebranding effort by the National Shooting Sports Foundation (NSSF) for lethal, high-capacity, military-bred firearms like the AR-15 and AK-47. A prior industry-wide effort to rechristen assault weapons "black guns" never took hold. So they're now "modern sporting rifles." At this churn rate, the NSSF (the "official" trade association for the gun industry, albeit always capably abetted by the industry's "unofficial" trade association, the National Rifle Association) will soon be down to calling them "Freedom Sticks." (This week the Violence Policy Center posted avideo on YouTube on the NSSF's "modern sporting rifle" rebranding campaign.)

In the SEC documents, Freedom Group details how the gun market has "softened," especially the market for "modern sporting rifles":

Our industry also experienced an increase in certain firearms demand between late 2008 and mid 2009. In the first quarter of 2010, sales in our firearms segment have softened from the levels experienced during that period. Demand for higher end centerfire rifles has softened and sales have transitioned to more moderately priced firearms, which has resulted in an overall sales decrease of 21.7% in our firearms segment during the three months ended March 31, 2010 versus the three months ended March 31, 2009...


Net sales for the three months ended March 31, 2010 were $94.7 million, a decrease of $26.3 million, or 21.7%, as compared to the three months ended March 31, 2009. Centerfire rifle sales decreased by $24.2 million, or 27.8%, as compared to the prior-year period, primarily due to reduced sales demand for modern sporting products
[assault rifles]. Shotgun sales decreased by $1.2 million, or 4.9%, as compared to the prior-year period. Rimfire rifle sales decreased by $1.0 million, or 14.4%, as compared to the prior-year period.

When the self-declared top assault-weapon cartel--with, let's remember here, nearly half the U.S. market--reports a nearly 28 percent drop in centerfire rifle sales "due to reduced sales demand for modern sporting products," it's fair to say that the assault rifle boom in general, and the AR-15 rifle boom in particular, is over.

In March, I wrote a blog about the first cracks appearing in the gun industry's post-Obama boom. One manufacturer talked about the "collapse" of the assault rifle--specifically AR-15--market, noting that panic-buying as the result of President Obama's election had come to an end. "The consumer just stopped buying," the manufacturer stated, the "sales blitz lasted about eight months."

The blog resulted in a bevy of counter-arguments from the NRA and NSSF, the most recent being an article in the June edition of the NRA's America's 1st Freedom magazine, ironically citing Freedom Group's Bushmaster as one proof of the AR-15's manifest destiny as "the standard center-fire rifle platform for all applications."

And that's because the industry views assault weapon sales as key to their future. As the industry publication The New Firearms Business noted in November 2008:

the sole bright spot in the industry right now is the tactical end of the market, where AR and AK pattern rifles and high-tech designs, such as FNH USA's PS90 carbine [sic], are in incredibly high demand right now.

In a market that continues to shrink over the long term, assault weapons are the "sole bright spot" with sales potential. Especially if they can be rebranded as "modern sporting rifles" for "all applications" to traditional sportsmen. That's the legal side. On the illegal side, regardless of this year's warmer and fuzzier label du jour, assault weapons have a proven appeal to criminals--from mass shooters and cop-killers in the U.S. to narco-terrorists in Mexico (where, according to U.S. law enforcement, Bushmaster and DPMS AR-15s are primary "weapons of choice" of gun traffickers). And the gun industry cares little about who buys their guns--just as long as someone,anyone, does.

And while the NRA and gunmakers more often than not are allowed to make up their own facts when it comes to their industry, now and then they have to play by other people's rules--like those of the Securities and Exchange Commission. And that's when we get a glimpse of the truth.

Follow Josh Sugarmann on Twitter: www.twitter.com/VPCinfo


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