Nothing sells guns like fear. Americans are panic buying firearms and bullets at a record rate amid a trifecta of anxieties: the coronavirus pandemic, the ongoing economic meltdown and social unrest following the police killing of George Floyd.
For one gunmaker at least, the sales surge is coming too little too late. Remington, which bills itself as “America’s oldest gunmaker”, is reportedly preparing to file for bankruptcy and in talks with the Navajo Nation about a possible sale.
A Chapter 11 filing would be Remington’s second trip to bankruptcy in as many years. Loaded with debts of over $950m piled on by its owner at the time, private equity group Cerberus, the company first filed for court protection in 2018. That restructuring saw creditors take control but allowed Remington to shed some $700m from its debt pile. Even so, the company has struggled to bounce back.
Among other things, Remington makes the AR-15-style semi-automatic rifle used in the 2012 Sandy Hook school shooting. The company still faces an expensive lawsuit from the families of the victims.
It has also had to contend with the industry-wide drop in gun sales under the Trump administration. With a Republican in the White House, consumers no longer feared stricter gun control. The urge to stock up on firearms dissipated.
Unfussy investors might be tempted to see the current wave of gun stockpiling as a chance to get in on a beaten up sector. Shares in Smith & Wesson have more than doubled this year, taking them close to three-year highs. Sturm Ruger is closing in on its 2014 peak after advancing 70 per cent for the year to date. Analysts are expecting the sales boom to continue until at least the presidential elections in November.
But Remington serves as a cautionary case study. The gun industry is riddled with financial, reputational and litigation risks. A sales boom can easily turn to bust.
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