Coronavirus Fuels Boom in Bullet Sales for Vista Outdoor and Olin
Ammo sales have surged for Vista Outdoor and Olin Corp. during the Covid-19 pandemic as fears of coronavirus and civil unrest prompt Americans to buy guns and bullets.
Vista Outdoor CEO Chris Metz said in an earnings call Thursday that strong ammunition sales in the last quarter were driven by an industry-wide 40% increase in first-time gun buyers during the pandemic, including women and people of color, based on data from the NSSF gun industry group. He said that ammo demand is so brisk, and fueled in part by stockpiling, that some new buyers have complained that they can’t find enough ammo in stock.
Vista Outdoor’s stock price surged 18% on the news, though Olin’s stock price dipped 6%, with a weak performance from its chemical sales overshadowing its strength in ammo.
Anoka, Minn.-based Vista Outdoor, which makes dozens of outdoor and shooting products, including CamelBak hydration packs used by hikers and soldiers, Bell bicycle helmets, Bushnell rifle scopes and several brands of ammo, on Thursday reported an 8% rise in sales last quarter compared to a year ago, “driven by continued consumer trends towards personal protection” as well as a “resurgence in outdoor recreation activities.” Brett Andress, analyst for KeyBanc Capital Markets, said in an investor note that Vista Outdoor earnings results beat “heightened expectations” driven by organic sales growth of 17% in the shooting sports category.
Federal background checks for gun purchases totaled 3.64 million in July, the third-largest monthly tally since the Federal Bureau of Investigation started tracking background checks in 1998. Gun analysts and retailers attribute the boon to buyers arming themselves because of fears of civil unrest during the pandemic. The FBI reports nationwide tallies for background checks every month. These checks are not the same as gun sales, but they serve as the closest nationwide proxy.
Metz said that ammo sales often trail gun sales by months, implying continued strength in the ammo category going forward. He said sales were also driven by purchases of non-gun outdoor products like bicycles and camping equipment as people are going “back to nature” during the pandemic.
Bullet sales were the bright spot in an otherwise dismal quarterly performance for Olin Corp. as its chemical sales slowed in tandem with a flattening economy.
The 128-year-old Clayton, Mo.-based chemical company said Thursday that Winchester ammo sales rose 17% in the quarter compared to a year ago. Olin, which also makes chlorine, vinyl and epoxy, attributed the increase primarily to higher commercial ammunition sales, and CEO John Fischer said he expects demand to remain strong in the months ahead.
“We expect this elevated level of demand to continue at least until the end of the year,” said Fischer, in an earnings call on Thursday.
Jim Chartier, retail analyst for Monness, Crespi & Hardt, said this is part of a wider trend of rising sales for firearms and ammunition during the pandemic.
“Industry data continues to highlight unprecedented demand for ammunition and firearms,” said Chartier, in a note to investors, referencing the record-breaking increases in federal background checks for guns.
“Google Trends data shows a similar acceleration for ammunition given concerns around COVID, civil unrest and the upcoming election,” he wrote, noting that “this year’s surge has been driven by first time buyers.” He told Forbes that the company has attributed this to an increase in hunting licenses, in addition to pandemic fears.
On Wednesday after the market close, Olin reported a steepening net loss of $120 million for the quarter, a six-fold increase from its year-ago net loss of $20 million. Sales for the chemicals that serve as the backbone of its business, including chlor alkali products, vinyl and epoxy, fell 27% year-over-year, dragging down the company’s overall performance.
Frank Mitsch, senior analyst for Fermium Research, said in a note to investors that the “large miss” was expected because of the pandemic. But he also said that he “wouldn’t be surprised to see further upside” to Winchester sales because of “coronavirus panic buying of ammunition,” especially considering the FBI data on background checks.
The month of July was particularly difficult for many Americans, with more than 50 million workers having filed for unemployment and a mounting death toll of more than 150,000 people from Covid-19. The Commerce Department reported an epic 33% plunge in gross domestic product for the second quarter. Nearly 1.2 million workers filed for unemployment in the week ending Aug. 1, according to federal data on Thursday, with 16.1 million workers filing continuing claims.
Olin and Vista Outdoor ammo sales aren’t completely dependent on the civilian market. Both are solidifying their roles as military suppliers.
Olin is forecasting a promising future as a military supplier. Winchester is in a contract to operate the Lake City Army Ammunition Plant in Independence, Missouri, which produces ammo for the Army. Winchester projects that the ammo plant will increase its annual revenue by $450 million to $550 million.
Vista Outdoor recently announced two ammunition deals with the Army, including a $13.8 million order for 5.56 NATO MK311 frangible ammunition which breaks into fragments on impact, and another contract to supply its Federal Ammunition brand 7.62 x 51 mm NATO ammo, which is used in sniper rifles and the belt-fed M240 machine guns.