How President Trump is bad for the gun industry

Will NRA-backed Trump actually hurt the gun industry?
Will NRA-backed Trump actually hurt the gun industry?

It's a paradox for the gun industry: Their pick for president, Donald Trump, is no good for gun sales.

President Barack Obama was the greatest gun salesman in America -- until Hillary Clinton ran to replace him. Sales soared to records because gun owners feared they would impose tougher gun restrictions.

Now that a Republican endorsed by the National Rifle Association is in the White House, those supposed villains have disappeared. Sales of guns and ammo are falling, right along with the stocks of gun makers.

"I think the entire gun industry was planning on, and I think the entire country was thinking, that Hillary was going to win," Brian Skinner, the CEO of Kalashnikov USA, said in a recent interview with CNNMoney.

"And I know there was huge demand, all the manufacturers had huge orders, and then the day after the election, distributors were canceling orders left and right just because they realized Trump's coming in now."

Since Election Day, the two publicly traded gun manufacturers -- Sturm Ruger (RGR) and the former Smith & Wesson, which rebranded itself as American Outdoor Brand (AOBC) -- have suffered declines of more than 20% in their stock prices.

Background checks, which are conducted by the FBI for most gun purchases, dropped by 20% in January compared with a year earlier. And they were down 16% in December. Background checks do not precisely track gun sales, but they serve as the closest nationwide proxy.

Ammunition sales are down, too.

Demand was so strong in recent years that manufacturers couldn't keep up, helping to boost imports to record levels last year. But Olin (OLN), the conglomerate that owns Winchester Ammunition, reported Wednesday that ammo sales plunged 20% in the fourth quarter last year compared with the quarter before. That reflects a buildup in the months leading up to the election, followed by a drop.

"I think people are going to slow down and the industry as a whole is going to adjust," Skinner said from Kalashnikov USA's sleek white booth at the SHOT Show, the annual gun industry conference in Las Vegas. "Some of them are going to die off because the demand is not going to be like they thought it was going to be the next four years."

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The past eight years will be a hard act to follow for the gun industry.

Gun production more than doubled during Obama's tenure in the White House, according to the Bureau of Alcohol, Tobacco, Firearms and Explosives. And the FBI conducted more than 27 million background checks in 2016, breaking the previous year's record.

The end of the spike in "political sales" weighs heavily on the industry, said Robert Spitzer, a political science professor at the State University of New York and the author of the book "Guns Across America."

Because of Trump's election, "there is no political incentive to buy guns, and, as a consequence, we've seen a drop in gun sales," he said, projecting that "gun sales will be flat" going forward, as the manufacturers and retailers are now "a victim of their success."

Gun makers Vista Outdoor and Sig Sauer recently branched into ammo production, prompted by the boom in demand the last few years. It's a way of hedging their production: Ammo sales might be slowing, but at least bullets are products that get used up and replenished.

Guns, of course, last for years or generations. So gun makers and sellers must rely on collectors who buy more than one gun, and newly minted enthusiasts buying guns for the first time. The bad news for manufacturers is that there's already a stockpile of inventory.

Related video: Obama and Clinton were the greatest gun sellers in America

"The landscape of the gun industry has changed dramatically," said Louis Frutuoso, owner of Standard Manufacturing, a gun manufacturer in New Britain, Connecticut. "All the gun manufacturers were essentially hedging their bets on Hillary getting in. To that end, all the gun manufacturers produced and produced and produced a lot of guns."

Frutuoso makes the DP-12, an unusual pump-action double-barrel shotgun that reporters were lining up to shoot at the SHOT Show's desert range in Boulder City. He also makes AR-15s, military-style rifles whose sales spiked because of fears that Clinton would impose an assault weapon ban, as Obama tried and failed to do. Frutuoso said this resulted in an inventory glut at warehouses and gun shops.

"President Trump won the election, and now people aren't compelled to purchase firearms because now it's a pro-gun kind of government," he said, over the boom of the DP-12 being fired nearby. "There's going to be a lot of guns in the pipe for a great long period, simply because of the course of events leading to this."

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