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Vista Outdoor, the leading U.S. manufacturer of ammunition, announced plans to launch ammunition subscriptions in the fall, as Americans continue to stockpile guns and ammo, driving quarterly sales and profit to new heights.
“We’ll be the first to launch the new subscription program,” said Chief Executive Officer Chris Metz in an interview with me, though he wouldn’t detail costs and calibers for the monthly program. He said determining the calibers will be a “game time decision” based on availability, though he intends to include hunting loads and “funky calibers” that can be difficult to find.
The subscription rollout comes amid a multibillion dollar order backlog.
Vista Outdoor reported on Thursday an increase of 38% in sales to $663 million during the quarter ended June 27 compared to the year-ago quarter, while net income more than doubled to $102 million. Inflation played a role, the company said.
Vista Outdoor said this was its fourth consecutive record quarter. Americans have been buying guns and ammunition at unprecedented rates since the coronavirus pandemic swept through America early in 2020, upending the economy. Consumers are compelled by a myriad of fears, including rising gun violence in major cities, hate crimes versus Asian-Americans, and also outbreaks of civil unrest, including protests over police brutality against Black Americans and the storming of the U.S. Capitol on Jan. 6, 2021.
Gun retailers say that fear, as well as the specter of more restrictive gun control from President Joseph Biden, a Democrat, are driving sales for firearms and ammunition. Biden, who owns guns, has vowed to crack down on military-style semiautomatic rifles. Biden plans to ban the sale of assault weapons to civilians, and to require existing owners to register their assault weapons under the National Firearms Act, which requires a months-long background check process and a $200 tax.
While this has fueled sales, it has also created problems as demand outweighs supply, particularly for ammunition, resulting in nationwide shortages at gun stores.
“The ammunition industry remains capacity constrained, with consumer demand well exceeding available supply in the market for the past several quarters,” said Rommel Dionisio, analyst for Aegis Capital, in a note to investors. He said this has “resulted naturally in strong industry pricing” from producers like Vista, which exceeded expectations.
Metz said that consumer demand accelerated during the summer. “We cannot meet the current level of consumer demand,” he said in an earnings call with analysts.
Metz also said the company will be launching the ammunition subscriptions as part of a customer loyalty program. This is an unusual strategy for an ammunition maker, especially considering the extreme international demand for copper, a basic ingredient in bullets.
Other ammunition companies have also experienced a surge in demand. Olin Corp.
Demand for ammunition is so strong that it’s outstripped supply, exceeding the capacity of ammo factories working around the clock. Gun stores have been rationing purchases to two boxes per purchase, to try and keep the shelves in the ammunition sections from going bare, especially for popular calibers like .22, 9mm and .223.
Ammunition makers like Vista Outdoor, Olin and Ammo, Inc., can’t crank out enough, but they are trying. Olin also took over operations of the Lake City U.S. Army Ammunition Plant in 2020, and said this helped to boost sales and earnings, as well as “higher commercial ammunition pricing.”
Ammo Inc., an Arizona ammunition maker founded in 2016, started building a new factory in Wisconsin in June. But Metz said that Ammo Inc. is “going to build a factory and not be able to get enough materials.” He told me that Ammo has asked Vista for help in making primers. Ammo did not return a message asking for confirmation.
Vista Outdoor acquired an ammunition factory in Lonoke, Arkansas, in 2020 from Remington, which has filed for Chapter 11 bankruptcy protection twice in recent years. Vista recently brought this factory online to produce more ammunition to deal with overwhelming demand. Vista also completed its acquisition earlier this year of Hevi-Shot Ammunition.
“We achieved more [manufacturing] capacity than anyone in the industry by the fact that we acquired Remington and Hevi-Shot,” said Metz during the call. But he also said, “I don’t think we have one customer who is happy with their inventory acquisition,” despite the fact that factories are “working day and night.”
Vista Outdoor, which is based in Anoka, Minnesota, makes the ammo brands CCI, Federal and Speer, in addition to Remington, and it also makes Bushnell scopes. The company also has non-gun brands like Bell bike helmets and CamelBak hydration products. The company has denied accusations that it’s deliberately causing the shortage by hiding ammunition in secret warehouses.
Some gun enthusiasts have tried to get around the shortage by making their own ammunition through a small-scale assembly and machining process called reloading, which can be done in a basement or a garage. But reloaders face the same problem as big ammo manufacturers: a scarcity of raw materials in the face of record demand versus international competition.
Bullets requires copper, and so do Chinese manufacturers of microprocessors, and Chinese contractors who need electrical wiring for construction. Elon Musk, CEO of Tesla
In the past, U.S. retailers would rely on imported ammunition to meet spikes in demand, but the demand has never been so high. In Mexico in June, two trailer-loads of .22 rimfire ammunition valued at $2.7 million were stolen. According to the Associated Press, the ammunition was produced by Guanajuato and was bound for export to the United States.
Gun makers like Smith & Wesson and Sturm
Firearms manufacturers like Smith & Wesson and Sturm, Ruger tend to be cautious about ramping up production in any sort of permanent or expensive way. Gun makers are hesitant to expanding manufacturing capacity by buying or building new factories, because they fear an eventual downturn in sales. Smith & Wesson deals with spikes in demand by outsourcing production of certain parts, thereby sidestepping the need for an expensive new factory.
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