Business Worth Noting

Nov 5, 2021

It came as no surprise that Ruger’s Q3 2021 conference call discussed yet another solid quarter of numerology for financial types. As was pointed out to me in conversations at NASGW in Columbus, Ohio, Ruger’s been producing solid results, quarter after quarter, for something approaching the past decade.

But the most recent quarter points out a couple of things that every manufacturer would like to see happen in their business. First, they sold all those millions of dollars worth of products without discounts.

It’s not unusual for companies (especially publicly traded ones) to “pump” sales numbers by offering discounts of some description. Ruger hasn’t because, frankly, they haven’t needed to.

According to comments by Ruger’s CEO Chris Killoy, the distributors aren’t for discounts, they’re more than happy that the company has product. That seems to be borne out by new product sales. New products (products introduced within the past 8 quarters included the Ruger 57, the LCP-II in .22 LR, the PC Charger, Max-9 pistol and LCP-Max) accounted for

$116 million (22 percent) of the last nine months’ sales.

Another positive is the fact that distributors are still tens of thousands of units under their ideal inventory levels. With more new products in the pipeline, including the highly-anticipated return of the Marlin brand (it will not be a Ruger-branded/Marlin rifle -the brand will be stand-alone), the demand Killoy says he anticipates before the end of the year will be calls wanting “more Marlins.”

As a sidebar, the Marlin that was shown at NASGW was a Model 1895 in 45-70 caliber. And Killoy isn’t keeping his enthusiasm for the “new” rifle a secret. In fact, he told the analysts the decision to keep the Marlin brand separate was because of the brand’s history.

It’s also worth noting that Ruger’s numbers for Q3 were up, despite the fact the company shut down for a full week in July. It’s probably worth noting that with five fewer days in their manufacturing cycle compared to Q3 2020, Ruger increased production twenty two percent.

Right now, it seems every company is having a “Ruger-like” year. But that’s actually not so. Sales of firearms are booming, but not every company is so independent of reliance on off-shore parts, pieces or components. In fact, Ruger’s Killoy praised the manufacturing teams at their multiple locations for managing around what could have been supply chain issues. Rather than shutting down lines, he explained, using the ubiquitous 10/22 as an example, they went to assembly of different stock models until components arrived.

Not everyone in the outdoor industry is faring the same. In fact, some companies with heavy dependence on overseas manufacturing are really feeling the bite of the supply chain issues.

Containers, the big shipping boxes inside which products make their way to the United States are skyrocketing, cost-wise. As it was explained to me by one manufacturer who asked that I not use his name/company, the costs for his company’s containers has jumped from $3,000 to a staggering $26,000 -per container. And he says those costs are “crushing” some smaller companies.

Using his company as an “anonymous” example, there were six containers of product scheduled for delivery this week. That jump in cost means the cost of the containers jumped to $156,000- without paying for the products inside them.

It has to be disheartening as a businessman to see your sales and market share increasing, but have to look for additional capital because of supply chain issues. As he explained it to me, “some smaller companies are heading down a path of no return.”

Even larger companies are feeling the bite. One company currently has more than 150 containers of product “on the water” - that’s an increase in costs of $3.9 million dollars- again, without the cost of the products inside those containers.

As he explained it, “hyperinflation is a hell of a lot closer than anyone wants to talk about.”

And no one in business wants to explain who’s ultimately going to pay those skyrocketing costs. If you’re doing your grocery shopping and noticing empty spaces in aisles or a lowered selection of constantly more-expensive products, you already know who ultimately winds up with the bill: consumers.

We’ll keep you posted.

— Jim Shepherd