The Exchange

Businesses React to Newtown Tragedy

The Exchange

Following the initial visceral, emotional reaction to the tragic shootings at Sandy Hook elementary school in Newtown, Conn., the conversation naturally turned to the major issues at hand, such as gun control laws, Second-Amendment rights and the state of mental health care in the U.S.

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And while we are still in the very early hours of the "aftermath" stage, businesses, too, have started to rethink certain practices as they weigh public sentiment and consider the possible impact this incident might have going forward.

Superstore Walmart (WMT), which sells guns at 1,750 of its 4,602 stores and ranks No. 1 in firearm and ammunition sales compared to its national competitors, has reacted by pulling one gun from its Web listings: the Bushmaster Patrolman's Carbine M4A3 Rifle. This gun is a popular, military-style rifle which, because of added barrel length, is legal for sale to individuals.  It is also in the same family of rifles as the one used by 20-year-old gunman Adam Lanza in the Sandy Hook rampage.

Lanza reportedly used a .223-caliber Bushmaster semiautomatic rifle; two handguns were also said to be found by his body in the school. The AR-15 style of gun he reportedly used is, according to gun dealers, the most popular rifle in the U.S.

All guns were registered to Lanza's mother, Nancy Lanza, whom Adam, according to police, murdered at her Newtown home before heading to Sandy Hook to kill another 26 people, including 20 children; he ultimately shot and killed himself. Nancy, by many accounts, was a gun enthusiast with a store of weapons kept in her sprawling, upscale home. All guns owned by Lanza, including the Bushmaster, were legal under Connecticut's assault weapons ban. According to reports, although Walmart has "virtually" removed the gun from its Web site listings, it can still be purchased from the retailer.

At the same time, private equity company Cerberus Capital Management reported that it's selling off its entire investment in Bushmaster and returning any profit made to investors. Cerberus bought Bushmaster in 2006, then merged it with additional gun companies to create Freedom Group, which reported net sales of $677 million for the first nine months of 2012, up $112 million from 2011. In a statement, Cerberus said, "It is not our role to take positions, or attempt to shape or influence the gun control policy debate. That is the job of our federal and state legislators. There are, however, actions that we as a firm can take."

Dick's Sporting Goods (DKS) -- which boasts 500 stores in 44 states -- has, for now, removed display of all guns nearest its Newtown store and also ceased the sale of modern sporting rifles in all stores. In a statement on its Web site, Dick's says, "Out of respect for the victims and their families, during this time of national mourning we have removed all guns from sale and from display in our store nearest to Newtown and suspended the sale of modern sporting rifles in all of our stores chainwide."

Interestingly, some reports say sales of guns have increased following the shooting, likely at least in part because consumers fear stricter gun laws could limit their access. While the hard sales numbers are not yet available, dealers across the country are reporting a heavy increase over the past few days. One Florida gun retailer told Yahoo! Finance that they grossed $40,000 this past Monday, while, "on a typical weekday, we strive to gross $10,000."

At the same time, gun stocks, following a quick initial surge after the news of the shooting first hit, have fallen hard this week; Smith & Wesson (SWHC) has been down as much as 10% on Tuesday. Both Smith & Wesson and Sturm, Ruger & Company (RGR) had already dipped in the days before the shooting, following a surge that has still left Smith & Wesson up an impressive 92% year-to-date. Ruger is up 28%.

Early business reaction has not been limited to nearly $32 billion firearms industry. The business of media has also seen effects. A Pittsburgh red-carpet premiere for Tom Cruise's $50,000,000 Paramount Pictures vehicle "Jack Reacher," in which he plays an investigator tracking a sniper, was put on hold "out of respect for the families." The marketing for the film may also be tweaked. Following this cancellation, the Weinstein Co. announced it would cancel the Los Angeles premiere of Quentin Tarantino's latest offering, the Western "Django Unchained."

The Discovery Channel has also canceled its reality series "American Guns," which follows a Colorado family that works in the firearms business. This comes after Facebook users rushed the show's site and called for its ouster in the wake of the shootings. The show is currently out of production but has run for two seasons and 26 episodes, and has been popular with audiences. According to reports, the season two premiere had a 50% increase over the first season debut.

The videogame industry is another that could be affected following the Sandy Hook tragedy, as fingers point toward the often violent games' effect on the psyche of American youth (Lanza was apparently a fan of the wildly popular, military-themed "Call of Duty").  These early reactions could be forecasting long-term changes in the business world, or we could be back to "business as usual" before long. This remains to be seen as this far-reaching, fast-moving story continues to unfold.

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