S&W's sales down 48.5% compared to last year...

[HB]

I sold firearms for a distributor for a few years. Then Trump got elected. Then it made no sense for me to sell guns.

Distributor margins were slim. My margins were very slim. NcStar holsters are where I made my money.

A local FFL "makes" about $50 on a glock. If you want to get rich you need to be Sig and sell millions of pistols at a tiny margin or start selling homes, insrance, or financial advice like a normal person.

HB

 

[Solomonson]

So comparing guns to a cherry-picked jewelry proves exactly what? Why not compare guns to something that makes more sense like name-brand power hand tools or a multitude of sporting goods? I guess that wouldn't serve your agenda, would it?



And that relates to guns in what way? If you want some real snazzy numbers, go ask your dentist for his P&L, but then again, it has nothing to do with firearms.



You're wrong. You've clearly never worked in product development/engineering/manufacturing. Just how much R&D do you think Glock spends (or has spent) on its handguns? How much of that is fully amortized at this point? In any event if you were to look at a cost profile from Glock for one of their handguns, it would show the cost of: purchased parts + raw materials + time different cost centers used to make + direct labor + overhead (where all your impressive individual costs are pooled plus a whole lot of others), either for the entire facility or by cost center depending on how their accounting system is set-up. Costing out a G19 isn't rocket science -- well, it may be to you.

You DO realize that companies have fully pooled/calculated OH rates (typically as a % of process time or direct labor time) that include everything you're trying to make a show about?

It's amusing how people like you make long lists of costs as if they cannot be estimated. They are done every day -- from tiny machine shops to automakers and everywhere in between.



No. You would have costs based on their cost (or profit) center -- be they an individual machine, a department or even an entire factory.



See above. Your listing of (some) costs may impress some people -- it might even impress you, but they're a non-starter -- just like your jewelry example.

I sold firearms for a distributor for a few years. Then Trump got elected. Then it made no sense for me to sell guns.

Distributor margins were slim. My margins were very slim. NcStar holsters are where I made my money.

A local FFL "makes" about $50 on a glock. If you want to get rich you need to be Sig and sell millions of pistols at a tiny margin or start selling homes, insrance, or financial advice like a normal person.

HB

Were tier 1 distributors and retailers' margins about the same from polymer handguns -- about 10-15%? Thanks.

 

[Solomonson]

It was labor that was working three shifts. And staying employed.

Once again, it was management and stockholders of gun companies that benefited most from the go-go Obama days. I really wonder who exactly was running three shifts each day? In discrete manufacturing, in balls out mode, two 10 hour shifts (which typically consume 21 or 22 hours of every 24 hour period) are run either 4 or 5 days per week. Then two weekend crews run either two or three days, sometimes in 12 hour shifts. The extra time each day is used for machine maintenance, housekeeping, etc.

 

[deadin]

So your basic argument is that guns cost more than they should and certain people (management and stockholders) are making obscene profits? What are we supposed to do about it? They're going to charge whatever the market will bear and as long as there are enough people that will pay the inflated cost, it will continue. If we all just refused to buy at the high price, the price will either come down come down or the supply will dry up thereby encouraging higher prices for the remainder.
It's called capitalism..... although I suppose we could outlaw it, but I'm not sure if the alternative would be any better.

 

[Deanimator]

In six months, plywood and sandbag sales in Miami will probably be down too.

When people are no longer [justifiably] afraid of extra-legal bans and confiscations, unconstrained by the rule of law, "panic" buying tends to abate.

 

[fastbolt]

Yeah, where? And for what product? 24 hour production shifts for discrete manufacturing are fairly uncommon. (difficult to schedule maintenance, housekeeping and direct labor under those circumstances.) It would be interesting to know who does those....

I've been told by people from S&W and Glock (in armorer classes) that they were running 3 shifts for some of the manufacturing and production, due to demand, and the Glock instructor said that they even had their repair techs working shifts covering 24 hours (last Fall).

I'd not be surprised to see this return to some semblance of normal (1 or 2 shifts) with the recent cooling of the market.

 

[Elkins45]

Once again, it was management and stockholders of gun companies that benefited most from the go-go Obama days. I really wonder who exactly was running three shifts each day? In discrete manufacturing, in balls out mode, two 10 hour shifts (which typically consume 21 or 22 hours of every 24 hour period) are run either 4 or 5 days per week. Then two weekend crews run either two or three days, sometimes in 12 hour shifts. The extra time each day is used for machine maintenance, housekeeping, etc.

OK, so it's clear you think gun companies shouldn't be run for a profit.

Feel free to start one that isn't. I look forward to hearing about your market success.

 

[MidRoad]

I've been told by people from S&W and Glock (in armorer classes) that they were running 3 shifts for some of the manufacturing and production, due to demand, and the Glock instructor said that they even had their repair techs working shifts covering 24 hours (last Fall).

Well that MUST be a false statement,because glocks dont break!

In all seriousness though,im not surprised the sales are down. Like others have said, most likely due to panic buying. Cant really expect a fire arms company to match the previous years sale when such a controversial election was in progress. S&W "black guns" are the most "pushed" guns at our LGS due to their name and price range. imwilling to bet it is common across the country. If a large portion of people who would not normally purchase "black weapons" went out and purchased an ar or handgun last year due to a chance they would not be able to obtain one in the future,not out of necessity but out of fear (for a lack of better words),why would they buy another this year.

 

[Cooter Boolit]

Well, you know what they say... never let a good crisis go to waste.
Hang in there folks, a civil war is coming, guns & ammo will be even in a larger demand than ever before... if we dont get nuke`d first.

 

[Solomonson]

What are you including in the $125.00 "product cost"?

Purchased parts, raw material, scrap, direct labor, associated machine/process hourly costs, consumables (test ammo, tools, etc.) absorbed overhead(s), and freight out. Much of the individual costs that some love to list are pooled in OH rates for different cost centers.

 

[Solomonson]

So your basic argument is that guns cost more than they should and certain people (management and stockholders) are making obscene profits? What are we supposed to do about it? They're going to charge whatever the market will bear and as long as there are enough people that will pay the inflated cost, it will continue. If we all just refused to buy at the high price, the price will either come down come down or the supply will dry up thereby encouraging higher prices for the remainder.
It's called capitalism..... although I suppose we could outlaw it, but I'm not sure if the alternative would be any better.

I said that the price of firearms have little relationship to what they cost to design/produce/sell. Actually that's changing. AR15s in the $300-400.00 range show a far clearer relationship than essentially the same firearms which were being sold for $1,400+ not all that long ago.

 

[Solomonson]

OK, so it's clear you think gun companies shouldn't be run for a profit.

Feel free to start one that isn't. I look forward to hearing about your market success.

Please don't ever attempt to speak for me. It makes you look foolish.

I don't believe I'll need to start my own firm. Prices will continue to drop for some time, that's certain. It will be interesting to see if we have any collusive behavior going forward.

 

[Solomonson]

In six months, plywood and sandbag sales in Miami will probably be down too.

When people are no longer [justifiably] afraid of extra-legal bans and confiscations, unconstrained by the rule of law, "panic" buying tends to abate.

Not comparable. Plywood and sandbags carry neither the legal luggage, the restrictions nor the stigma that gun manufacturing does.

 

[red rick]

It is a little surprising that sells are down that much , but I expected sales to go down after we elected a Republican president .

As to the price , the price is set by manufacturing cost , competition and what people will pay . I don't see anything wrong with it in most cases . If you can not sell it for more than it cost you to make it , than you will have to close your doors , unless you are our government .

 

[larryh1108]

Automakers make somewhere between 5 and 15% on sales. More for luxury/specialty cars, but 5-15% on average.

<chuckle>

Uh huh. I'd be curious as to how you got this figure.
As someone who spent 20+ years in the automotive business, if you think it costs $22,500 to make a car that sells for $25,000 (10% average profit of your guesstimate) then you are really not informed very well. I'll stick my neck out and say it probably "costs" $10,000 to build that $25,000 car if you figure it the same way you figure the cost of producing a gun.

Now, if you are saying the NET profit is 5% to 15% then you may be close but by the way you are banging gun companies for their markup, you feel that the retails on guns are way out of line. I don't buy your figures of true cost when you figure in all factors such as all the insurances needed to produce and sell firearms. I don't but your figures for that huge production facility as well as the taxes they pay for the building and land. I don't buy your figures of the cost to buy and maintain the machinery. I don't buy your figures on interest paid for the building, machinery, raw materials and computer systems. I don't buy your figures for R&D because you have no idea what they spend to stay ahead of the competition as well as being a leader of the next, greatest gun. You have no idea what they pay in payroll taxes, Social Security benefits and health insurance premiums for their workers. You have no idea what they pay for profit sharing and/or 401k programs. You just have no idea, period.

You make it sound so easy.... it costs $80 to make so a retail price of $200 should cover everything. You may be a student of firearms sales flow but it appears that you are not a student of real costs to operate a mega company. Just because you think they charge too much for firearms does not make it true. The producers seem to have a handle on what they need to sell them for to make a profit and to keep the doors open. Rebates come from somewhere to stimulate sales. They seem to work but if they just lowered the prices instead of giving rebates (and you'd be shocked at how many people do not submit the proper docs (if any) to get that rebate) then the people would slow down buying while they wait for the next rebate even though the prices were cut (see how automobile rebates affect sales).

Like many successful companies, they bank the profits when times are good to keep the doors open for when times are bad (like now). If they continue to sell their guns at a certain price point then they seem to know what is going on. Cycles are a part of long term business. Those who don't plan how to stay afloat during the tough times just close their doors like so many gun shops are doing because they didn't plan for when sales dropped when the bubble burst. Yeah, they charge a lot because they need to so they can weather the tough times. If you don't like the prices, don't pay them. Millions of others think the prices are fine.

 

[Elkins45]

Please don't ever attempt to speak for me. It makes you look foolish.

I don't believe I'll need to start my own firm. Prices will continue to drop for some time, that's certain. It will be interesting to see if we have any collusive behavior going forward.

I'm not speaking for you. I'm just extrapolating your comments to their logical conclusion. Your disdain for management and shareholder profit is certainly not an indication of support for a capitalist business model. But since I don't have a dog in this fight I will refrain from restating the obvious again.

At some point as prices drop they might well stop dropping and actually reverse because the producers had to close their doors. As I asked before, how many guns does S&W have to sell in a day just to keep the lights on? Downward pricing competition couple with lowering demand is a recipe for weaker companies to fail.

I would rather have a selection of moderately priced guns as opposed to no selection of cheap ones.

 

[fireman 9731]

Here's another potential buyer that isn't a buyer because of the lock. I love Smith & Wesson revolvers, but all of mine are either pre-lock or one of the few new production no-lock guns. We can argue how much sales would increase if they dropped the lock, but there are also probably some sales that would be lost due to poorly informed buyers wanting a lock or so called safety on their guns.

Anyway, how about those ammo prices? That's where my pocket book is hurting. If you shoot very much, you will spend more on ammo than you do the gun.

 

[22-rimfire]

Mostly think it is AR sales that are flat. If you want one, you already have one or two. To me they are kind of like computers, as long as you got that function covered, you really don't need another. Of course it depends on what you use them for. In my case, with computers, I always have a backup machine as I depend on them a great deal and I suspect folks that are really into AR's do the same.

I'm glad sales are down a bit. Maybe that will encourage new models and some stability on pricing. As said, the gouging was at the retailer level back a few years ago and not really at the manufacturing level.

 

[red rick]

I agree , prices and the ammo shortage is why I started reloading .

 

[SSN Vet]

I would be very interested in knowing what portion off the price of a new firearm is...

1. tax.
2. regulatory compliance.
3. liability insurance.

 

[Solomonson]

I'm not speaking for you. I'm just extrapolating your comments to their logical conclusion. Your disdain for management and shareholder profit is certainly not an indication of support for a capitalist business model. But since I don't have a dog in this fight I will refrain from restating the obvious again.

At some point as prices drop they might well stop dropping and actually reverse because the producers had to close their doors. As I asked before, how many guns does S&W have to sell in a day just to keep the lights on? Downward pricing competition couple with lowering demand is a recipe for weaker companies to fail.

I would rather have a selection of moderately priced guns as opposed to no selection of cheap ones.

No, you're attempting to speak for me to further your own views. That's incredibly bad form.

 

[Solomonson]

<chuckle>

Uh huh. I'd be curious as to how you got this figure.
As someone who spent 20+ years in the automotive business, if you think it costs $22,500 to make a car that sells for $25,000 (10% average profit of your guesstimate) then you are really not informed very well. I'll stick my neck out and say it probably "costs" $10,000 to build that $25,000 car if you figure it the same way you figure the cost of producing a gun.

Now, if you are saying the NET profit is 5% to 15% then you may be close but by the way you are banging gun companies for their markup, you feel that the retails on guns are way out of line. I don't buy your figures of true cost when you figure in all factors such as all the insurances needed to produce and sell firearms. I don't but your figures for that huge production facility as well as the taxes they pay for the building and land. I don't buy your figures of the cost to buy and maintain the machinery. I don't buy your figures on interest paid for the building, machinery, raw materials and computer systems. I don't buy your figures for R&D because you have no idea what they spend to stay ahead of the competition as well as being a leader of the next, greatest gun. You have no idea what they pay in payroll taxes, Social Security benefits and health insurance premiums for their workers. You have no idea what they pay for profit sharing and/or 401k programs. You just have no idea, period.

You make it sound so easy.... it costs $80 to make so a retail price of $200 should cover everything. You may be a student of firearms sales flow but it appears that you are not a student of real costs to operate a mega company. Just because you think they charge too much for firearms does not make it true. The producers seem to have a handle on what they need to sell them for to make a profit and to keep the doors open. Rebates come from somewhere to stimulate sales. They seem to work but if they just lowered the prices instead of giving rebates (and you'd be shocked at how many people do not submit the proper docs (if any) to get that rebate) then the people would slow down buying while they wait for the next rebate even though the prices were cut (see how automobile rebates affect sales).

Like many successful companies, they bank the profits when times are good to keep the doors open for when times are bad (like now). If they continue to sell their guns at a certain price point then they seem to know what is going on. Cycles are a part of long term business. Those who don't plan how to stay afloat during the tough times just close their doors like so many gun shops are doing because they didn't plan for when sales dropped when the bubble burst. Yeah, they charge a lot because they need to so they can weather the tough times. If you don't like the prices, don't pay them. Millions of others think the prices are fine.

"Uh-huh." This took all of 15 seconds to Google:

http://www.detroitnews.com/story/bu...r-car-profits-beat-ford-gm-chrysler/23852189/

I'm going to guess that the average unit now sell for (at least) $15K. That's a margin of 4.36% for GM, 5.67% for Fiat/Chrysler and 6.62% for Ford. Most profitable was Toyota -- truly a world class company at 18.17% In reality these margins are likely less because the average price/unit is actually higher.

So my 5%-15% estimate looks pretty darned reasonable to me.

 

[larryh1108]

I'm going to guess that the average unit now sell for (at least) $15K.

More like $35,000. This link is for the 2015 model year and the average was $33,189.
https://coverhound.com/insurance-learning-center/average-retail-car-prices-increase

As for the profit numbers you linked/quoted, is that gross profit or net profit? The article states the number difference is mainly due to cost of labor so it appears that the figures quoted are net profit. So, the actual raw cost of producing a car today is no where near the retail price. It's the same argument you've been making about the true cost of making guns... the actual, raw cost, not the net cost. I've been shown that there is a 1/3, 1/3, 1/3 cost formula for the total cost process. Raw materials, labor and mfg related costs and end production such as transporting, storage, warranties, etc. So, 1/3 of a $36,000 retail car shows a raw cost of $12,000. I can't speak for guns but that is how the automobile industry operates.

 

[Elkins45]

No, you're attempting to speak for me to further your own views. That's incredibly bad form.

No, I'm pointing out the flaws in your thinking. That's called debate.

 

[Solomonson]

More like $35,000. This link is for the 2015 model year and the average was $33,189.
https://coverhound.com/insurance-learning-center/average-retail-car-prices-increase

As for the profit numbers you linked/quoted, is that gross profit or net profit? The article states the number difference is mainly due to cost of labor so it appears that the figures quoted are net profit. So, the actual raw cost of producing a car today is no where near the retail price. It's the same argument you've been making about the true cost of making guns... the actual, raw cost, not the net cost. I've been shown that there is a 1/3, 1/3, 1/3 cost formula for the total cost process. Raw materials, labor and mfg related costs and end production such as transporting, storage, warranties, etc. So, 1/3 of a $36,000 retail car shows a raw cost of $12,000. I can't speak for guns but that is how the automobile industry operates.

You can keep tap-dancing if you like, but it won't change the fact that motor vehicles have long been a very low margin product -- ever since the says of Henry Ford. Using an average sales price of $33,189 would only reduce the profit/vehicle even more.

My comments were based on "cost of sales." What it costs to design, build, test, ship, advertise, including all the associated OH. I also removed healthy distributor, retailer and regulatory chunks from the MSRP before calculating the actual margin.

This isn't rocket science. Take a G19 apart. It's an extremely simply machine. Compare its complexity and materials used to a high quality, brand-name 1/2" drill motor at a 1/4 of the price. Heck, compare one to a wooden-stocked .22 rifle at less than 1/2 the price. It's no wonder that Glock (and others) can sell their wares at deep discounts to public safety agencies.