Smith & Wesson Brands has recently released its 10-K report, providing a detailed look into the company's financial performance. The Springfield-based company, founded in 1852, is a global leader in designing, manufacturing, and selling firearms, including handguns, long guns, and other related products under the Smith & Wesson, M&P, and Gemtech brands. Additionally, the company offers manufacturing services to other businesses and sells parts purchased through third parties. Smith & Wesson Brands caters to firearm enthusiasts, collectors, hunters, law enforcement, and military agencies, marketing its products through various channels, including independent dealers, retailers, and direct-to-consumer avenues.
In fiscal year 2024, Smith & Wesson Brands reported net sales of $535.8 million, representing an increase of $56.6 million, or 11.8%, over the prior fiscal year. The company's gross profit increased by $3.6 million, or 2.3%, primarily due to increased sales volume. However, the gross margin decreased by 2.7% from the prior fiscal year, attributed to various factors such as unfavorable fixed-cost absorption, accrued legal settlement, inflation on raw materials and labor costs, and unfavorable inventory reserves adjustments. Net income for fiscal 2024 was $39.6 million, or $0.86 per diluted share, compared to net income of $36.9 million, or $0.80 per diluted share, for the prior fiscal year. Smith & Wesson Brands paid $22.0 million in dividends during fiscal 2024, compared with $18.3 million in fiscal 2023.
The company announced the Relocation initiative on September 30, 2021, involving the construction of a new facility in Maryville, Tennessee, and the relocation of operations from Springfield, Massachusetts, and Columbia, Missouri. Smith & Wesson Brands incurred capital expenditures of approximately $157.0 million and $25.6 million of other restructuring charges related to the Relocation through April 30, 2024.
Smith & Wesson Brands evaluates its performance based on operating profit, return on invested capital, and adjusted EBITDAS. The company also tracks key performance indicators such as gross margin per unit produced, units produced per day, revenue by trade channel, and incoming orders per day.
The firearm industry is subject to external factors such as changes in the social and political environment, legislative actions, and economic fluctuations, which significantly impact revenue generation. Despite the volatility, Smith & Wesson Brands believes that these external factors have contributed to a long-term increase in consumer interest in firearms. The company estimates the annual domestic non-military firearm market to be approximately $2.9 billion for handguns and $1.8 billion for long guns.
In fiscal 2024, the company reported increased sales of handguns and long guns, driven by new product introductions and targeted promotions. However, other products and services sales decreased primarily due to decreased sales of component parts and business-to-business sales. Smith & Wesson Brands also highlighted the impact of decreased relocation spend and favorable mix associated with new products on its gross margin.
Operating expenses for fiscal 2024 increased by $7.2 million over the prior fiscal year, with selling, marketing, and distribution expenses being the primary contributor. The company's operating income decreased by $3.6 million, or 7.5%, primarily due to an accrued legal settlement, unfavorable inventory reserve adjustments, and one-time costs associated with the grand opening of the new Maryville facility.
Smith & Wesson Brands reported an increase in other income, primarily due to the sale of certain intangible assets, while interest expense increased as a result of higher average outstanding debt balances during fiscal 2024. The company recorded income tax expense of $9.8 million for fiscal 2024, $1.6 million lower than the prior fiscal year, with effective tax rates of 19.8% and 23.5% for fiscal 2024 and 2023, respectively.
Net income for fiscal 2024 increased by $2.7 million, or 7.4%, from the prior fiscal year. The company's operating activities generated $106.7 million in cash flow during fiscal 2024, a significant increase from $16.7 million in fiscal 2023.
Smith & Wesson Brands continues to focus on financing the growth of its operations, including working capital and capital expenditures, as well as returning capital to its stockholders. Following these announcements, the company's shares moved 0.4%, and are now trading at a price of $16.4. Check out the company's full 10-K submission here.
