Smith & Wesson Brands, Inc. Q1 FY2026 earnings call

• Product Performance: Strong demand for new products, exceptional handgun performance with shipments up over 35% YOY in sporting goods channel; divergent long gun market conditions with MSR and lever action market strong but shotgun and bolt action rifle market not played in meaningfully.
• Market Conditions: Market is cyclical with underlying consumer demand above pre-last surge, leadership in key categories maintained.
• Innovation: New products made up 37.3% of sales in Q1, Shield X had positive initial reception, strong pipeline of new products.
• Inventory: Distributor inventory is very healthy, down more than 13,000 units at end July 2025 compared with 2024, and down more than 17,000 units year over year.
• Academy Update: Smith & Wesson Academy is back in Tennessee, run by Mark Cociolo, offering training for law enforcement, military, and consumers.
• Capital Allocation: Prioritize leveraging state-of-the-art facility in Tennessee, optimizing and modernizing facility in Massachusetts, and investing in special initiatives to enhance brand and support customers.

In the first quarter, sales were $85.1 million. For handguns, shipments into the sporting goods channel increased just over 35% year on year, with ASPs down 4%. For long guns, shipments into the sporting goods channel were down 28.1% year over year, with ASPs down 13% due to mix. New products accounted for 37.3% of sales in the first quarter.

• Q2 Expectations: Second fiscal quarter sales expected to grow significantly over first quarter and land roughly 3% to 5% below Q2 fiscal 2025; Q2 gross margin in line with Q1 due to extended shutdown and steel tariffs; Q2 operating expenses likely 20% higher than Q1, half from profit sharing, remainder from academy opening, promotions, etc.
• Dividend: Board authorized 13¢ quarterly dividend to be paid to stockholders of record on September 18, payment on October 2.

• Macro Conditions: Cautious regarding full fiscal year due to macroeconomic conditions.
• Tariffs: Gross margin negatively impacted by 120 basis points from steel tariffs.
• Inventory: Potential impact on performance if inventory not managed properly.

Q: Hi, guys. I wanted to ask first about ASPs, kind of both in handgun and long gun. Just given kind of the competitive dynamics, but more so kind of where the consumer is. How do you feel about your pricing today on products? And do you feel there's any shifting that potentially could happen as we look through the rest of the year?

A: Hey, Mark. Yeah. The We are pretty pleased with the AFPs. Throughout the summer, as you know you know, that's our typically slow season you know, throughout the year in in firearms. And, you know, we were we were able to kinda maintain that. You know, the promotional environment still remains fairly robust out there. But for us, as I said in the in the prepared remarks, you know, with the the innovation making up a a significant portion of our of our pipeline of of products. And the strength of the, you know, even the core portfolio, you know, we were able to be pretty selective. We did participate, but, you know, you know, we are able to maintain those ASPs. And as we now, you know, go into the busy season, I think that bodes pretty well for us to to be able to hold those up throughout the rest of the year. K. And and then I I wanted to ask about the long term business. You talked about some markets where you don't really participate or have products. What opportunities do you have in in expanding your your product offerings maybe to hit some of these these segments?

A: Yeah. I mean, I think we've been well, we have definitely been very successful with the 1854, know, entering into that lever action market. I think that's kinda paved the way for us to, you know, to continue expanding into more of the white space for us. In the in the in the industry that we don't play in. So, you know, we're Mary continue. We're we're still expanding that lever action platform. You know, there's you know, two more calibers that we're that we're still kinda working on on filling out. And, you know, we're those will be coming here very shortly. But, you know and then after that, it's, you know, on to the next thing. Perfect. And the last one for me is just as we look out to to changes in regulations with the recent tax law, it's is there opportunities for some NFA items potentially suppressors and SBRs offer some higher demand as as we move into January.

A: Yeah. Good question. For sure. You know, I think there's a lot of pent up demand there in the suppressor market. As folks are, you know, kind of waiting for the for the that law to go in the go into effect in January. So, you know, I think in a you know, from a long term perspective, bodes very well for us. With the with the Gemtek brand. So, you know, we're already seeing some some movement there with some promotions on, you know, for a early discounts and and on on the text. Fact stamp promos that we're running with some of our some of our fire or sorry. Sorry. Our suppressor retailers and, you know, I think that's an early indication that know, that that should be pretty healthy market come January. Excellent. Thank you.

Q: Hey. Thanks. This is Matthew Raab on for Steve. Just wanna hone in on the legacy products. On on my math, legacy products were actually up very slightly year over year in the quarter. I guess, you know, two two sort of questions there. One, what do you credit the better performance to in the quarter? And then two, how do you feel about getting through the rest of that inventory as we look towards the the back half of the year?

A: Thanks, Matthew. Yeah. The, the the legacy product did very well for us. You know, we continue to gain share there. I think, you know, that the the combination of, you know, the strength of the brand you know, we're we are definitely taking share in that in that category. Of the more in line, you know, products, you know, excluding the new stuff. And we continue to see that, you know, that we we have some more runway there to go as we go through the rest of the year. And then from an from an inventory perspective, you know, we're hyper focused on that this year and kind of, you bringing our internal inventories kind of back down again, you know, just to be completely honest, we ended last year with maybe a little bit more than we wanted. And, you know, with that, I'll just remind you that, you know, for us in the firearms industry, that's not necessarily a concern. We obviously a strong balance sheet, and, you know, we're we're able to we're able to kinda navigate the ups and downs of the of the pretty well. I think we've proven over time and and, you know, for us now, that just means you know, again, these products, there's no expiration date on on on our inventory and just make some adjustments to the production run rate and and bring that down throughout throughout year.

Q: Sure. That's that's great. And then just just on promos, really thinking about the back half of the year, we expect Promac promo activity to accelerate to aid the inventory reductions, or should we expect promos to remain pretty pretty rational? And then maybe comparing that cadence to to last year would be would be helpful. I mean, it sounds like你're being pretty thoughtful about promos in the near term, but but any other thoughts there would be would be great.

A: Yeah. On the promotional side, I you know, I don't foresee any need for us to, you know, be you know, leaning in there any more than we already have throughout this summer. As I mentioned, you know, we are we are participating. We're you know, we're just doing a very thoughtful manner. You know, we're a lot of conversations internally about, you know, maybe a couple pockets here and there where we wanna, you know, promote. But, you know, I I think you can kind of expect that our ASPs will, you know, kinda hold up throughout the rest of the year. You know, we'll we'll participate, but, you know, I think we're we're probably in a little bit better position just given the strength of the brand and, you know, again, strong balance sheet where we can kinda be a little bit more measured and and in in our participation. So know, we'll participate, but I don't think you know, you you shouldn't expect that, you know, we're gonna have a significant increase as go through the back half.