What happened
Smith & Wesson Brands (SWBI -0.90%) reported financial results that missed the target by a wide margin. Investors didn't like what they saw, sending shares of the firearms manufacturer down as much as 18% on Wednesday morning.
So what
After markets closed Tuesday, Smith & Wesson reported earnings of $0.26 per share on revenue of $121 million for its fiscal second quarter, which ended Oct. 31. Those numbers were well below the $0.40 per share of earnings on sales of $145 million that analysts had expected.
The company blamed the macro environment for the miss, along with a difficult competitive environment. In a statement, CEO Mark Smith said that "consumer demand for firearms was significantly down from a year earlier, coinciding with a broader consumer slowdown driven by persistently high inflation, the beginning of winter heating season across the northern half of the country, and rising interest rates."
Deana McPherson, chief financial officer, said that "an ongoing inventory correction combined with the impact of promotional activity by our competitors" hit into revenue and profitability.
Now what
There is likely some truth to the reasons Smith & Wesson gave for the miss, but they don't offer much reason to be optimistic about the stock in the near term. Firearm demand soared during the pandemic, a time of some civil unrest, and appears to now be normalizing at a lower level.
Smith & Wesson has done a lot of work to streamline its operations and remain healthy during down cycles, but there isn't a clear catalyst up ahead. Investors should not assume the stock will blast higher once the smoke clears following earnings season.
