Last Thursday, it was back to Cabela’s for me and a longtime friend, my second trip this month, and a trip it is since the closest location is about 80 miles away. It’s been fascinating to see how consumer demand for guns and ammunition has been driven by current events as well as by the prospects of more restrictive gun laws on the horizon, and this trip furthered that narrative.
Gun demand has soared this year, leaving supplies short, and that was very evident once again in the depleted Cabela’s gun inventory. In addition, ammo shelves were nearly empty, many types of ammunition are nearly impossible to find, but there was an interesting dynamic that played during our visit. We noticed a group of customers huddled around a cart, and upon further inspection, it became clear what we were witnessing. This cart contained boxes of 3 types of hard-to-find ammo, including 9mm. It was almost as if folks were in complete disbelief what they were seeing, but pretty quickly much of that ammo (there was a 5-box limit) was snapped up. That process was repeated about an hour later. That was the first 9mm ammo I’ve seen for sale in a retail store in many moons. Indeed, this dynamic is having an affect on publicly traded gun and ammunition related names. Yesterday, shares of ammunition maker Vista Outdoor (VSTO) jumped 22%, to a four-year high, after an upgrade to “Outperform” by Cowen, along with a price target increase from $29 to $33. Cowen believes that demand will continue to flourish under a Biden administration’s tighter stance on gun control. While it’s not surprising that the prospect of gun legislation is helping drive demand and arming more Americans, it is ironic that the politicians have still not figured that out. We saw it big time during the Obama Administration, and I still consider him to be the all-time greatest gun salesman, a well-deserved moniker he would no doubt hate. Sportsman’s Warehouse (SPWH) , had an even better day, jumping 40%, but for a different reason. The company entered into an agreement to be taken private by the Great American Outdoors Group for $18/share. Big 5 Sporting Goods (BGFV) was up 18% on the back of the SPWH news. Meanwhile, gun makers Sturm Ruger (RGR) , and Smith & Wesson (SWBI) were both up about 3% on the day. Chemical name Olin (OLN) , which owns the Winchester ammunition business, and is the world’s number one producer of small ammunition was down slightly on the day, but has seen its shares double since September. OLN is a less direct gun-related play. Last year Winchester generated just under 11% of total company revenue. The name was, however, recently upgraded by KeyBanc to “Overweight” with a $31 price target. [full article]