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Ruger Down 7%; Demand Bedevils Gun Makers, Retailers

John Seward

Sturm, Ruger & Co. (NYSE: RGR) tumbled more than eight percent Wednesday after weak demand caused a 13.5 percent decline in its second-quarter firearms sales.

Competitor Smith & Wesson (NASDAQ: SWHC) fell nearly four percent in sympathy, but the drop in gun demand isn't exactly news.

Cabelas (NYSE: CAB) last week reported a 14.2 percent decline in total same-store sales "largely due to ammunition, shooting, optics and firearms."

Similarly Sportsman's Warehouse (NASDAQ: SPWH), which completed its initial public offering in April, said last month that same-store sales fell more than 30 percent at its hunting and shooting department in the first quarter.

And Dicks Sporting Goods (NYSE: DKS) CEO Joseph Schmidt told investors in May that the company had underestimated its declining firearms sales. Schmidt, however, added in a conference call that, "we all knew the significant increase in sales during the past couple of years was temporary and driven by concern for both legislative action that would broadly change our gun laws.”

Sturm Ruger in its second-quarter report said in the first half of 2014 saw "a significant industry-wide reduction in firearms demand."

National Instant Criminal Background Check System background checks, a proxy for retail demand, fell 18 percent as adjusted by the National Shooting Sports Foundation.

Market trends appear to have been lost on analysts, as Sturm Ruger missed top and bottom line analysts forecasts by a significant margin.

Earnings fell 31 percent to $1.12 per share, while total revenue was down 14 percent to $153.7 million.

Smith & Wesson is expected to report earnings of $0.25 per share on Friday, September 5. Short interest represents 13.2 million of Smith & Wesson's 55.2 million shares outstanding.

Ruger traded recently at $53.25, down 7.63 percent; Smith & Wesson was down 4.19 percent at $12.80.

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