Covid-19 and Civil Unrest Fuel Comeback for Gun Industry

Gun sales are booming as the Covid-19 pandemic wrecks the economy and volatile protests dominate the news. Handguns are flying off the shelves. And ammo is so hot, it’s hard to keep in stock.

The gun industry is experiencing a revival amid the worst economic contraction in history, fueled by fears of coronavirus, crime and civil unrest. Guns were in demand during the economic turmoil of the second quarter, as gross domestic product experienced a 33% plunge.

“This is unprecedented,” said Larry Hyatt, owner of Hyatt Guns in Charlotte, N.C. He said that sales doubled in March, after gun stores were declared essential businesses.

Federal background checks soared to record heights in March, tallying about 3.7 million, and broke another record in June, with about 3.9 million, according to the Federal Bureau of Investigation. These are the biggest numbers since the FBI started background checks in 1998. While they’re not the same as sales, background checks serve as the nation’s closest proxy and are used as a measure for the industry.

Hyatt said the demand was triggered initially by fears of coronavirus, then customers started mentioning Black Lives Matter and urban riots as their motivation for buying guns.

“The city and the suburban people are buying the guns, because the rural people already had guns,” he said.

Hyatt initially sold mostly pump-action shotguns and AR-15s, since the state requires a two-week wait for handguns. But he said 9 mm handguns eventually became his top sellers, and he only managed to keep the coveted 9 mm ammunition in stock by rationing one or two boxes per purchaser.

Hyatt said his most popular gun is the 9EZ released last year by Smith & Wesson. He said the compact pistol appears to be designed for “senior citizens with small hands.”

Smith & Wesson does not divulge sales for individual guns. Elizabeth Sharp, vice president of investor relations, described the EZ pistol as a personal protection gun “designed to be easy to rack, load, shoot, and clean, [which] makes it appealing to a wide range of customers.”

This has long been the goal of the gun industry: to expand the demographics of its client base beyond rifle-toting hunters to include more women and others with a desire to conceal palm-sized weapons for self-protection.

“You’re now selling to the little old Catholic nun, the person who never in their life has owned a gun,” said Brian Rafn, a recently retired gun industry analyst from Morgan Dempsey whose family owns shares in Sturm, Ruger. “These are people who have never shot guns before.”

Rafn said it is the fear of lawlessness – depicted in reports of homicides in cities and clashes between protesters and law enforcement officers – that is driving new buyers to gun stores. President Trump is using this perception of lawlessness as a tool in his campaign for re-election.

Mass shootings during the Barack Obama presidency spurred record-breaking sales as the campaign heated up between Trump and Hillary Clinton, who was planning more restrictive gun control. Trump, endorsed by the National Rifle Association, won the election instead of Clinton, and gun sales immediately plunged.

Mass shootings, while they spurred sales, sometimes dragged down stocks because “each event represents a renewed call for regulation,” according to a 2017 paper by Brad Greenwood of George Mason University and Anandasivam Gopal of the University of Maryland. But during the pandemic, stock prices are rising in tandem with gun sales. Sturm, Ruger and Smith & Wesson have gained significantly since March.

Greenwood said that even with the civil unrest from the murder of George Floyd spreading across the country, there is no longer a substantial fear of gun regulation as there was with mass shootings. He said this allows gun makers to “reap an economic windfall” without worrying about losing longer-term profits.

Gopal said that gun control will take a back seat to the pandemic and the economy.

“Even if the Democrats do win the Presidency this November, it appears that gun regulation may not be the first thing they will tackle, given the other things that require immediate attention,” said Gopal.

But not every gun company is a winner. One of America’s most venerated gun makers, Remington Outdoor Company, filed for bankruptcy on July 27 for the second time in two years. The company was still dealing with a financial hangover from the post-election Trump slump. Remington, maker of the Bushmaster AR-15 used in the Sandy Hook Elementary School mass shooting of 2012, also faces a wrongful death lawsuit from family members of murdered teachers and students. As for the pandemic sales surge, Remington said it was left out because of disruptions in its supply chain.

Investors will soon have a better picture of the industry. The FBI is expected to release its background check tally for July on Aug. 1 or shortly thereafter. This could indicate whether the strong sales are a passing fad, or a lasting trend that could strengthen in the months leading up to the election.

And then, it’s up to the voters.