Gunmaker Smith & Wesson Brands Inc. (NASDAQ:SWBI) reported Thursday that steel tariffs by the Donald Trump administration cut into its profitability last quarter and are expected to continue squeezing margins. The company posted a net loss for its first fiscal quarter despite what it called robust demand for new products.
Check out SWBI’s stock price over here.
Steel Tariffs Hit Gross Margins
In its earnings call, Chief Financial Officer Deana McPherson specified that the company’s gross margin was hit by a “120 basis point negative impact from tariffs, stemming primarily from steel.” This pressure contributed to a quarterly net loss of $3.4 million, or $0.08 per share, on sales of $85.1 million.
The company projects the tariff impact will persist, with McPherson stating that second-quarter gross margin is expected to be in line with the first quarter’s 25.9%.
Firearms Market Remains ‘Relatively Normal’
Despite the financial headwinds, CEO Mark Smith described the current firearms market as “relatively normal” and cyclical, a shift from the surge years.
He pointed to a sharp divergence in the company’s portfolio, with handgun shipments to the sporting goods channel surging over 35% year-over-year, while long gun shipments fell 28.1%.
Smith credited the company's focus on innovation for its resilience in a promotional environment. “Innovation remains a cornerstone of that strategy with new products accounting for 37.3% of sales in the first quarter,” he said.
He highlighted the “very positive initial reception” for the new Shield Act pistol as an example.
See Also: Smith & Wesson Brands Beats Q1 Earnings On ‘Robust Demand’ For New Products
SWBI To Relaunch Smith & Wesson Academy
Looking ahead, Smith & Wesson announced a major strategic initiative: the relaunch of the Smith & Wesson Academy at a new 30-acre facility in Tennessee.
The academy, led by a retired U.S. Navy SEAL veteran, will offer free training to law enforcement and military clients while also providing courses for consumers, aiming to promote responsible ownership and showcase the company’s firearms.
Smith & Wesson Q1 Earnings Snapshot
Its first-quarter revenue of $85.07 million beat analyst estimates of $79.23 million.
The company reports an adjusted loss of 8 cents per share, beating estimates for a loss of 11 cents per share.
Smith & Wesson Brands said it expects second-quarter revenue to be about 3% to 5% lower than the comparable quarter last year, but up "significantly" compared to the first quarter.
Price Action
The stock rose 2.37% on Thursday and was up 0.49% in after-hours trading. It has fallen 17.74% year-to-date and 42.14% over a year.
Benzinga’s Edge Stock Rankings indicate that SWBI maintains a weaker price trend in the short, medium, and long terms. However, the stock scores well on value rankings. Additional performance details are available here.
The SPDR S&P 500 ETF Trust (NYSE:SPY) and Invesco QQQ Trust ETF (NASDAQ:QQQ), which track the S&P 500 index and Nasdaq 100 index, respectively, rose on Thursday. The SPY was up 0.84% at $649.12, while the QQQ advanced 0.91% to $575.23, according to Benzinga Pro data.
On Thursday, the futures of the S&P 500, Dow Jones, and Nasdaq 100 indices were trading higher.
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