Once again I have the honor and pleasure of presenting to my reading audience the monthly portrait of the gun business as rendered by the background check data published by the FBI. Believe it or not, the gun industry is the only consumer product industry whose health and welfare can be understood with reference to government-issued data which doesn’t lie. Because no matter how many guns are floating around, no matter how many gun transfers do or do not require background checks, unless the gun makers can make and sell more guns, sooner or later it’s bye-bye guns. And since most gun shops try to keep the new-gun inventory as light as possible if only because the damn things cost so much, the overall number of new-gun transfers recorded on the background-check form (ATF4473) really gives a very accurate picture of what’s happening on the factory floors.
And what’s happening is that the gun industry is in the dumps. For October, the total number of completed 4473 forms covering gun transfers was 928,474. A year ago, the October number was 1,056,548, a month-to-month drop of 12 percent. Since the beginning of the year, handgun transfers have totalled 5,281,038. Over the same period in the last year of the Obama regime, handgun transfers were 6,492,102. That’s a drop of nearly 20 percent.
The only problem with these numbers is that the 4473 form doesn’t distinguish between the transfer of new and used guns. But we can assume that the breakdown between new and used guns in most gun shops is somewhere around half and half. So if the entire retail gun segment has sold around 2,600,000 new guns this year, there’s a reason why the price of Smith & Wesson stock has dropped from $28 to $14 since 2016.
In 2013, the year following Sandy Hook when Obama tried (but failed) to pass a new gun law, the gun industry produced around 5 million handguns, which was the biggest single production year the industry ever had. That same year, in rough numbers, the FBI processed 5,750,000 handgun background checks. In other words, dealers cleaned their shelves. Now here’s the real number to consider. The population of the U.S. in 2013 was 316 million (give or take a couple of hundred thousand) the population at mid-2018 is estimated to be 327 million and change.
So here’s the bottom line. So far this year the number of new hand guns that entered the civilian arsenal was somewhere around 795 guns per 100,000 population; in 2013 that same number was 1,012. In other words, the per-capita purchase of new hand guns since 2013 is down by more than 20 percent.
If you can find another consumer industry that can sustain itself over any period of time when its market drops by 20 percent, give me the name and I’ll short the stock. What we have here folks, is a consumer industry whose market share is not only slowing down, but isn’t even keeping pace with the size of the potential market itself. Because if the population of the U.S. goes up roughly 1 percent a year, no consumer industry will survive over the long term if the size of its market doesn’t at least increase by the same 1 percent. This isn’t rocket science, by the way, it’s simple business math.
All these numbers would be slightly less dismal had I looked not just at data on handguns but data covering all guns manufactured and sold. The reason I didn’t bother to break down sales of rifles and shotguns is that the gun industry has all put its product eggs into the handgun basket. Now you can always pretend that an AR-15 is a personal defense weapon even if it happens to be a long gun. But walking around with a concealed weapon doesn’t mean that you can strap on an AR-15.
The joke in the gun business is that if you want to make a million, start with two million. It may not be a joke.