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Tariffs a problem for the manufacturer of Smith & Wesson weapons



The company reported a weaker-than-expected gain on Thursday as arms sales declined. It also warned investors that earnings in the second half of the fiscal year would decrease $ 5 million due to the impact of US-China tariff escalating trade wars.

The tariffs mainly concern his outdoor products – hunting and fishing accessories, which account for more than a quarter of his turnover. Many of these products are manufactured in China, and the company warned that there are few alternatives to pay except tariffs when they come into effect this year.

"Given the worsening tariff situation, opportunities to offset these effects have begun to decline rapidly," said CEO James Debney in a conversation with investors on Thursday. "Our supply chain in China is relatively sophisticated compared to other low-priced countries, making a quick changeover difficult, and it takes some time to bring a brand new manufacturer online, and the duration of the tariff is still very unclear."

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The company lowered its full-year earnings guidance due to the cost of tariffs, even though the revenue target was maintained.

"Without these effects, we would not have matched the earnings per share of our most recent forecast, but tariffs are making it unlikely now," said CFO Jeffrey Buchanan.

The company did not disclose how many of its firearms are manufactured in China, although the business faces the separate problem of lower arms sales across the industry. The company's handgun deliveries decreased 7% in the quarter, and supplies of rifles such as rifles decreased 8%. Much of the decline was attributable to late-quarter promotions, which increased supplies during this period but have recently led to sales declines.

The arms sales have been steadily declining in the nearly three years since President Donald Trump was elected. Weapons enthusiasts' fear that weapons control measures have diminished since the 2016 elections and reduced demand for weapons, which were very strong under President Barack Obama.
The lower arms sales and revenues in the quarter combined with the reduced earnings guidance for the remainder of the year released the shares of American Outdoor Brands ( AOBC ) on Friday according to the report in the morning trade fall by 12%.

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