Gun Sales Expected to Shoot Up

July 16, 2010— -- After a Supreme Court decision affirming the right to bear arms was handed down in June, the owners of Midwest Sporting Goods, just outside of Chicago, started noticed something any retailer would find encouraging – an increasing number of customers.

With Chicago's 28-year ban on handgun ownership rendered unconstitutional, more people were coming into Midwest, in Lyons, Illinois, to exercise their Second Amendment rights, according to Noel, the store's owner. He asked that his last name not be published.

Lock and Load

"It's not like sales suddenly went through the roof," he said. "There are still restrictions and waiting periods. But we are anticipating a major increase in sales going forward. It's not going to happen overnight, but it's going to happen."

Others in the industry agree that sales of firearms, particularly pistols and revolvers, could explode.

"Over the long term, as restrictions fall by the wayside, you will see gun sales increase," said Lawrence Keane, general counsel for the Newton, Connecticut-based National Shooting Sports Foundation, a lobbying group representing the nation's 55,000 licensed firearms dealers.

The legal reverberations of the Supreme Court Case, McDonald v. City of Chicago, likely will be felt across the country for years to come, so gun sellers shouldn't be overly fired up just yet.

Violence-plagued Chicago's ban on handguns and automatic weapons was unique in its strictness -- only the District of Columbia had ever attempted to legislate an outright ban on handguns, and that was overturned by the Supreme Court in June 2008. But many states, such as New York, have extremely strict permit laws pertaining to purchasing and carrying firearms.

Two states, Illinois and Wisconsin, prohibit citizens outright from carrying concealed handguns. Eight states, including California and New York, have restrictive carry-permit laws, even for buyers who pass criminal background checks.

Loosened Firearms Restrictions: 'Just the Beginning'

Buttressed by the recent legal victory, the National Rifle Association and other gun-rights advocates have vowed to fight firearms restrictions.

"This is not the end of the discussion, it's just the beginning," the NSSF's Keane said.

Analysts who follow gun manufacturing in the U.S., an industry in large part driven by sales to law enforcement agencies, view Smith & Wesson, makers of the popular semiautomatic M&P pistol, as among the chief beneficiaries of the Supreme Court ruling.

"Clearly, [the Supreme Court decision] is going to lead to a wave of suits challenging restrictive state and local gun purchase laws, with the net result being very positive for gun manufacturers, particularly Smith & Wesson," said Rommel Dionisio, a consumer products analyst for Wedbush Securities in Los Angeles.

Shares of Smith & Wesson Holding Company, based in Springfield, Massachusetts, popped after the ruling came down, jumping from around $4.10 to $4.30. But the stock has since fallen under $4 following revelations that the company is being investigated by the Department of Justice for possible violation of the Foreign Corrupt Practices Act, which prohibits bribing foreign officials.

Higher Revenues Forecast

Still, Smith & Wesson has forecast higher revenues for its fiscal year 2011, which is about to begin. It is unclear whether the recent high court ruling was factored into that projection. Repeated calls to the company went unreturned.

Other companies expected to benefit from any increase in pistol and revolver sales are Hartford, Conn.-based Colt's Manufacturing Company, which does not trade publicly, as well as the Austrian gun maker Glock and Italy's Beretta, both of which have large U.S. subsidiaries.

In general, gun sales, as reflected by data from the FBI's National Instant Criminal Background Check system, have risen in the past decade. The NICS system, which was created in 2000, reported 8.5 million checks that year. In 2009, there were 14 million checks, up from 12.7 million in 2008. In the first six months of this year, there have been around 7 million checks.

Data from the Bureau of Alcohol, Tobacco, Firearms and Explosives shows that more handguns are being made in the U.S. in recent years. Around 1.9 million pistols were made in 2009, up from 1.6 million in 2008 and 1.2 million in 2007, according to the ATF.

The election of President Obama, viewed by gun enthusiasts as being staunchly anti-Second Amendment, had been expected to bring a spike in gun sales as buyers rushed to buy firearms before there were new limits.

Kristen Rand, legislative director at the Washington, D.C.-based Violence Policy Center, said there is NICS data that supports a mild post-Obama-election gun sale uptick in late 2008 and early 2009. But she countered that the recession has jammed retail firearm sales since then.

"If gun makers and sellers see their business as being poised to take off, then I'd say it's a case of wishful thinking," Rand said.

In a recent Washington Times Op-Ed,Washington, D.C.'s metropolitan police chief, Cathy Lanier, pointed out that in the two years after a ban there was lifted (as a result of the Supreme Court decision in District of Columbia v. Heller), only 900 handguns and semiautomatic rifles or shotguns that could not have been registered before the decision ended up being registered after it came down.

Underscoring her opposition to any further easing of gun restrictions, Rand said that since May 2007 concealed handgun permit holders have killed 175 people.

"The NRA positions itself as being about Constitutional rights," Rand said. "In reality, it is a shill for the gun industry, nothing more."

One store that has seen an increase in handgun sales in recent weeks has been Backwoods Outdoors in Leesburg, Georgia, three hours south of Atlanta. Handgun sales shot up dramatically in the past few weeks, although, according to store manager Christy Vallandingham, it had little to do with the Supreme Court ruling.

"There was a local business owner who got shot during a robbery last week," she said. "Around the same time there was a hostage incident at a nearby Family Dollar store. Afterwards I'd say we had about a dozen small business owners come into the store to buy guns."