Smith & Wesson Brands, Inc. reported second‑quarter fiscal 2026 results that showed a 3.9% decline in net sales to $124.7 million, down from $129.7 million a year earlier. The company’s GAAP net income fell to $1.9 million, or $0.04 per diluted share, compared with $4.5 million ($0.10 per share) in the same quarter last year. Non‑GAAP net income was $2.0 million ($0.04 per share) versus $5.2 million ($0.12 per share) a year earlier, and adjusted EBITDAS reached $15.1 million, or 12.1% of net sales, down from $19.1 million (15.0%) a year ago. The earnings beat analyst expectations for EPS by $0.04, a 40% beat, while revenue exceeded the consensus estimate of $123.3 million by $1.4 million.
Gross margin contracted to 24.3% from 26.6% year‑ago, a 2.3‑percentage‑point decline driven by higher material costs and an 80‑basis‑point negative impact from tariffs. Management attributed the compression to a shift toward lower‑margin product mix and to a temporary reduction in production absorption as inventory levels were trimmed. The company’s average selling prices rose 3.5% YoY, with handguns up 2.1% and long guns up 10.2%, indicating that pricing power remained intact even as volume mix shifted.
Operating cash flow surged to $27.3 million, up $34.7 million from the prior year, largely due to a $27.3 million inventory reduction. The inventory write‑down freed cash and improved working‑capital efficiency, offsetting the margin squeeze. Cash flow strength also supports the company’s dividend policy and potential share‑repurchase activity.
New product introductions accounted for 38.7% of sales, a near‑40% contribution that underscores the strength of Smith & Wesson’s innovation pipeline. The company guided third‑quarter sales to grow 8‑10% year‑over‑year, a forecast that exceeds analyst estimates and signals confidence in demand recovery. Guidance also indicated that channel inventory would not materially impact the outlook.
Market reaction to the results was markedly positive, with the stock rallying nearly 17% on the day of the release. Investors cited the EPS beat, the revenue beat, and the optimistic Q3 guidance as key drivers. Analysts highlighted the company’s ability to maintain pricing power in the face of cost inflation and to leverage new product momentum to offset headwinds.
CEO Mark Smith emphasized that the quarter “demonstrated the strength of the Smith & Wesson brand and the continued success of our innovation strategy.” CFO Deana McPherson noted that the gross‑margin decline was “primarily due to decreased absorption on temporarily lower production as we focus on inventory optimization and an 80‑basis‑point negative impact from tariffs.” Together, the comments reinforce management’s focus on operational efficiency and disciplined capital allocation.
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