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Surge in firearms demand products fivefold increase in Ruger's third-quarter profit

Surge in firearms demand products fivefold increase in Ruger's third-quarter profit

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Another sharp increase in demand for firearms amid the COVID-19 pandemic and national political tension enabled Sturm, Ruger & Co. to post Wednesday a nearly fivefold hike in third-quarter net income to $24.75 million.

The report was a near repeat of Ruger's second-quarter performance, which yielded a threefold profit hike to $18.6 million.

By comparison, net income a year ago was $4.82 million. The third-quarter 2020 profit was offset somewhat by Ruger paying $8.1 million in income taxes, up from $1.5 million a year ago.

Third-quarter sales soared 54.3% to $145.1 million after jumping 35.2% in the second quarter to $130.3 million.

Third-quarter diluted earnings were $1.39 per share, up from 27 cents a year ago. There were no earnings forecasts from Zacks Investment Research.

"Consumer demand showed no signs of letting up during the quarter," Christopher Killoy, Ruger’s chief executive, said in a statement.

Killoy cited consumer motivating factors as "concerns about personal protection and home defense (being) stoked by civil unrest in some cities around the United States ... and the call, by some, for the reduction in funding and authority of law enforcement organizations."

"As a result of this unprecedented demand, inventories remained significantly reduced at all levels in the channel during the third quarter."

The key firearms industry measuring stick is the National Instant Criminal Background Check System background checks. The checks increased just 1% for all of fiscal 2019.

However, for the third quarter of 2020, checks soared by 68%, which was on top of a 65% jump in the second quarter and 42% surge in the first quarter.

Ruger has a major production plant in Mayodan, with 315 employees at last count. Its headquarters is in Southport, Conn., along with production operations in Earth City, Mo.; Newport, N.H.; and Prescott, Ariz.

There had been an industrywide sales slump since the Trump administration took office in January 2017 with a pro-gun policy that eased fears of heightened restrictions under a potential president Hillary Clinton.

By contrast, gun sales surged in the months after President Barack Obama’s 2008 and 2012 victories out of some gun owners’ fears that Obama might pursue tighter firearms restrictions.

However, over the past eight months, Ruger said some individuals opted to buy their first firearm. Others are existing gun owners adding to their collection, or stocking up on ammunition after seeing grocery stores depleted, schools closed and big events canceled.

Ruger’s share price closed Wednesday at $65.48, up 6.5% from May 26 and 70.3% from its 52-week low of $38.44 on March 12, a few days before the brunt of the pandemic began to be experienced nationally.

May 26 is the day demonstrations and protests began across the U.S. following the death of George Floyd, who died soon after a Minneapolis police officer knelt on his neck for nearly nine minutes on Memorial Day.

However, the share price had been as high as $90.74 on Aug. 10.

Ruger's board of directors declared a third-quarter dividend of 56 cents per share, payable Nov. 27 to shareholders registered as of Nov. 13. The dividend represents 40% of net income for the quarter.

On Sept. 29, a federal bankruptcy court judge approved Ruger paying $30 million for the Marlin firearms business from Remington Outdoor Co. Inc.

"Once the purchase is completed, the company will begin the process of relocating the Marlin Firearms assets to existing Ruger manufacturing facilities" that is likely to include its plant in Mayodan.

"We anticipate closing on this purchase in the fourth quarter and look forward to re-introducing shooters to Marlin rifles in the second half of 2021," Killoy said.

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@rcraverWSJ

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