Smith & Wesson Brands, Inc. reported a challenging financial performance for the three months ended July 31, 2024, with significant declines in revenue and profitability compared to the same period in the previous fiscal year. Net sales decreased by 22.7% to $88.3 million, down from $114.2 million in Q1 Fiscal 2024. This decline was primarily attributed to a 38.1% drop in handgun sales, which totaled $53.3 million, while long gun sales increased by 31.6% to $24.7 million. The gross profit for the quarter was $24.2 million, reflecting a 20.4% decrease from $30.4 million in the prior year, resulting in a gross margin of 27.4%, slightly up from 26.6% in Q1 Fiscal 2024.

The company reported a net loss of $2.1 million, or $(0.05) per share, compared to a net income of $3.1 million, or $0.07 per share, for the same period in 2023. This loss was accompanied by a significant cash outflow, with net cash used in operating activities amounting to $30.8 million, a stark contrast to the $40.6 million in cash provided during the same quarter last year.

Total current assets decreased to $285.3 million from $287.9 million as of April 30, 2024, with cash and cash equivalents dropping to $35.5 million from $60.8 million. Total liabilities increased to $193.3 million, up from $179.8 million, driven by a rise in notes and loans payable, which grew to $69.9 million from $39.9 million. Stockholders’ equity also declined to $378.0 million from $398.2 million.

Strategically, Smith & Wesson has been focusing on its relocation project to Maryville, Tennessee, which has incurred $157 million in capital expenditures to date, with total expected costs between $160 million and $170 million by the end of fiscal 2025. The company has committed to creating at least 620 new jobs as part of this initiative. Additionally, Smith & Wesson repurchased 870,669 shares for $12.9 million during the quarter under a $50 million share repurchase authorization.

The company is also facing legal challenges, including a claim for $18.6 million related to an asset purchase agreement and various product liability cases. Despite these challenges, Smith & Wesson remains compliant with all financial covenants and has adequate capital resources to fund operations for at least the next 12 months.