Industry Report: Rise in Gun Sales Prompts Industry Chaos

Before December 2012, the firearms industry was riding out one of its best sales seasons of all time. Indeed, gun companies raked in the money thrown at them by eager consumers, resulting in not just the highest number of background checks in a single day — the FBI reported 154,873 background check requests on Black Friday — but also the best year for gun sales in recorded history.

To say then the gun industry was doing pretty well would be an understatement, and from the looks of things, it would take a real catastrophe to really change things.

And as we're all painfully aware, that's exactly what happened. Right around the time sales began to peak, a horrible tragedy suddenly put guns in the spotlight for all the wrong reasons, and all of a sudden those sales numbers either seemed trite in comparison, or were used to reflect what some talking heads deemed a violent, paranoid sect of American culture.

A proposed ban and other legislative regulations on firearm ownership has therefore sent dealers and companies into a frenzy, especially those that almost exclusively deal with semi-auto rifles that are so commonly referred to as "assault weapons." These rifles — as well as all the high capacity magazines that go with them — have skyrocketed in value due to the unprecedented demand. In fact, it's not uncommon to walk into your local gun store and find the ammo shelf almost completely picked over, or find that companies and dealers backlogging more requests than they can meet.

"The tactical firearms marketplace is certainly no stranger to turmoil — look what happened during 1989, 1994, 2004, and 2008," said S.P. Fjestad, author and publisher of Blue Book of Gun Values. "The difference between what's going on now and what happened back then is how fast things have changed.  Tactical firearms consumers used to take months to react to factors within the marketplace — now it can happen almost overnight!"

Indeed, the industry was almost immediately sent into a frenzy after the Sandy Hook shootings on Dec. 14. According to The Associated Press, the FBI reported the week following Dec. 14 saw the highest spike in background checks for a week-long period since 1998; the second-highest came not long after, when President Barack Obama announced his administration would be pushing gun control legislation during his second term. Those numbers continued to climb into the new year, CNN reports, with eight of the 10 highest days for gun sales recorded by the FBI.

"After the Newtown tragedy, it was clear that an assault weapons ban became a very serious focus of the White House and debates intensified on Capitol Hill, " Rommel Dionisio, a Wedbush Securities analyst, told CNN. "That led to consumers flocking to stores to buy guns before they could be banned."

That is, if they're even able to get their hands on a gun. Public demand has outpaced companies' ability to keep up, resulting in thousands of backlogged orders. Glock, for example, has a 10-month backlog, according to CBS Atlanta.

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Demand for AR-15 variants is even higher. Earlier this month, Stag Arms reported two years of back orders on its rifles, prompting the company to not accept any new orders, according to The Boston Globe; the company has even gone so far as to recruit office workers to help packing and shipping in an attempt to beat any new restrictions that may be enacted in the near future. In the same article, Smith & Wesson noted $332.7 million in backlogged orders — nearly double its backlogged orders in 2011 — and Springfield Armory also pledged to boost production through outside vendors and its own facilities.

Similarly, ammunition sales have skyrocketed to the point that both companies and vendors cannot keep up.

"We are hearing of spot shortages of some calibers of ammunition at retail," said the National Shooting Sports Foundation in a statement. "Demand has been high for several years. America's ammunition makers are working hard to safely produce and ship the quality and quantity of ammunition to meet that demand."

The St. Louis Post-Dispatch reported area vendors staying up late to place orders with wholesalers while supplies last. What's more alarming is how the shortage affects law enforcement agencies, which according to WTHR-TV have had trouble trying to maintain a steady supply of ammo. Some departments have even had to cancel training exercises.

"In years past, you could be looking at one, maybe two months. Now you're looking at one, maybe two years," Franklin (Ind.) Police Chief Tim O'Sullivan told WTHR-TV.

The frenzied demand has in turn affected firearms' values. Blue Book of Gun Values released a series of charts putting the public firearms demand in a visual format. The chart on the left displays the prices for four different AR-15s, AK-47 imports, three different high-capacity semi-auto pistol variations and high-capacity magazines, as well as both .223 Rem./5.56 NATO and 9mm ammunition.

As you can see, the prices for all — besides S&W semi-auto pistols — saw an increase between Dec. 14 and Dec. 22. After a slight dip, prices for most models continued to increase, though Bushmaster ARs saw a decline.

Ultimately, the fluctuation in prices completely disregards the true value of any given firearm.

"When fear, greed and speculation are the dominating factors for the demand of a specific firearms configuration, values are almost impossible to accurately ascertain," Fjestad said. "It's like a gun's value is almost forgotten about, and price becomes the only consideration."

Long term, Fjestad said, this could spell disaster for gun companies, which could see the value of its products drop dramatically.

"This is the largest and hardest stampeding 'buffalo herd' (tactical firearms consumers) I've ever seen in my 30-plus years in the firearms industry," Fjestad said. "Are they destined to run off the cliff and plunge to their deaths? We're going to find out in the next six months."

For more information on current and weekly market insight, visit BlueBookofGunValues.com and sign up for an annual subscription.