A couple of recent retail visits suggest to me that this is going to be one heck of a holiday retail season. Yes, its anecdotal and not a significant sample size, but folks are out buying, and that does not even address the online sales component.
A trip to Walmart (WMT) yesterday for a handful of items ended up taking a whole lot longer than it should have. The store was packed, and it did not help matters that just half of the cashier lines were operational. But shopping carts were as full as I've seen them, which added even more time as cashiers rang up seemingly endless items. Forget about self-checkout as that line wrapped around the store. I'm quite sure that yesterday was Sunday, and not Black Friday, but you could have fooled me.
An early morning pre-Thanksgiving visit to Cabela's last week was equally interesting, but in a different way. Folks were buying there too, but inventory, specifically in the gun and ammunition area was very sparse. We are in the midst of another run on guns and ammo, fueled in part by Americans continuing to arm themselves in a time of uncertainty. That's been happening for months, but the specter of further controls, limitations, and taxes by the incoming Biden administration is only adding fuel to the fire. Background checks were up 60.1% year/year in October.
Forget about buying ammunition, there was very little available. It was actually worse than what I experienced back in 2013, when stores received weekly shipments, and customers lined up outside to buy limited amounts. Now, you just can't find it. I did check at Walmart on Sunday as well, and the shelves were nearly empty.
There's also been some activity in the gun industry, namely the July bankruptcy of 200-year-old Remington, and the September auction of its businesses. Notable deals included Sturm Ruger's (RGR) buying Remington's Marlin firearm business for $28.3 million, Vista Outdoor (VSTO) getting its Lonoke ammunition business, and Sportsman's Warehouse' (SPWH) walking away with Tapco Brands.
Gun related stocks are doing well this year, and that's despite a pullback since mid-August. RGR, up 30% year-to-date topped out around $90, and closed Friday at $61.05. It currently trades at 14.5x next years consensus estimates, and yields 2.42%. Smith & Wesson (SWBI) , up 61% year-to-date, topped out in the mid $21 range in August, and again in September, but closed Friday at $15.6. It currently trades at just under 13x next year's consensus estimate, but that estimate is less than half of the $2.51 per share the company is expected to earn this year.
Vista Outdoor, however, is continuing to shoot the lights out (pun intended), and has not seen the pullback the others have. Up 184% year-to-date, it's been a steady rise, and the name is just a couple of bucks off its 52-week high. VSTO sold its Savage Arms and Stevens Arms gun businesses in 2019, and is concentrating on ammunition and gun accessories in addition to other outdoor products. VSTO trades at about 9.5x next year's consensus estimate.
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