Founded at the beginning of the Cold War and in the midst of a slump in firearms sales, Sturm, Ruger & Co. is fighting back against today’s firearms sales slump with an aggressive approach to new product introductions and a CEO who hunts, shoots and makes a positive contribution to the shooting sports.
A Harvard Business School graduate and former Navy submarine officer, Ruger CEO Mike Fifer is setting the course for his company's success in the future.
SSR: How would you define your leadership role at Ruger?
Fifer: I’ve spent most of my career in manufacturing companies, and I’ve always had my greatest successes with new products. So building stuff and trying to come up with new and creative and innovative stuff — that’s kind of what trips my trigger.
SSR: So in the midst of an overall slump in firearms sales, Ruger comes out with a new AR-style rifle. How did that happen? And hasn’t the buying cycle for modern sporting rifles already passed?
Fifer: We’re very excited about the new AR-556. We originally came out in 2009 with the piston-operated SR-556, a more-expensive-to-manufacture piston-operated gun. So we had to sell it at a little higher price than we might have preferred, and that prevented a lot of our fans and loyal consumers from being able to buy it.
We soon realized we needed to build an affordable, full-featured and reliable gas impingement model. That’s the niche we’re filling with our new AR-556.
SSR: With a suggested retail price of $749, the AR-556 certainly seems to be well-positioned in a low-to-moderate niche. Many of your quality handguns cost much more than that.
Fifer: It was a real challenge to design and build because we found that we really couldn’t have an affordable gun if we were buying a lot of parts from suppliers. We had to vertically integrate, and we brought in a lot of new machining — used a lot of floor space in the factory — and it took quite a while to get everything set up and running. But the outcome is a wonderful rifle at a very affordable price.
SSR: And it’s the first gun conceived and built entirely in your Mayodan, North Carolina, facility, right?
Fifer: Well, honestly, it was being sketched out up in Newport, New Hampshire, and there are a lot of New Hampshire guys who were involved in the early stages; and then some of them moved with it down to North Carolina. The North Carolina guys would like to take all the credit, you know, but the truth is somewhere in the middle.
SSR: Is there a parallel between Ruger’s founding during a gun-selling slump after World War II and today’s slump in the waning years of the Obama administration?
Fifer: There is a bit of an overall slump. I think of 2013 as the year people bought the gun they wanted because they thought it was endangered. And perhaps they bought a few extra guns and maybe overindulged. This year they’re sort of digesting what they bought, but I expect that 2015 will be a great year and sales will come back on the classic path.
Think of Thanksgiving. What do you do? You overindulge eating and the day afterward you’re kind of in a food coma and you take it easy. But if you look at that feast over a six-month period, one day of indulgence doesn’t really affect your eating habits. I don’t think it will affect gun-buying habits, either. Everybody got a little overindulgent in 2013 and then pulled back in 2014, but they’ll come roaring right back in 2015 and 2016.
SSR: Speaking of finances, is Ruger buying back shares and what does that mean?
Fifer: The Board has authorized me to initiate a share buy-back if needed. But from a Ruger perspective, it doesn’t make any sense to buy shares back, with one very narrow exception.
Normally people analyze the price of a company as a ratio: what multiple of the earnings are you paying to buy a share of that company. Companies tend to operate — for a variety of reasons — within a fairly narrow band of what’s called a “trading multiple.” A new high-tech company might have a very high trading multiple; an older manufacturer might have a very low trading multiple, but that figure stays about the same year after year. Price fluctuates with how the company is doing. If the company does well the price creeps up, and if it does poorly the price goes down or stays about the same.
So the one and only time it makes good economic sense for a company to repurchase its own shares is when the company — for whatever reason — is trading well below its normal range of earnings multiple. We authorized a potentially large share repurchase, but in my communication with shareholders I said there was a good chance we wouldn’t buy back a single share.
With the softness in the market though, if Ruger reports weaker-than-expected quarterly results, the stock market might react emotionally and the stock price could go down to stupid levels. If that happens we’ll buy shares back. If that doesn’t happen we won’t buy any back. If it goes down to really silly levels, people who are invested in Ruger and want to stay invested in Ruger will benefit if we buy back some of the cheap shares. If the shares stay fairly priced we won’t buy any back, but will let the market do its thing.
SSR: In your last quarterly report you mentioned several trends that contributed to the reduction in overall demand: weak sell-through from distributors to retailers, deep discounting by competitors and the lack of outstanding new products. What is Ruger doing to address these, and will other new products — other than the AR-556 — be available by the 2015 SHOT Show?
Fifer: Well, we announced five new products I believe in just the month of September. The AR might be the most prominent, but there’s the double-action 9mm LCR and several other guns.
So yes, we went through something of a drought in exciting new product introductions, but that’s the nature of new product development. You think you’ve got it all figured out and then you realize there’s something you can improve, something that you can make better before you launch the product, and you go back to work on that. It takes a while to get it all right.
And we’ve got more products coming. Our commitment to retailers is number one. We’ll continue to bring new products to market that will draw customers to their store. We’re going to continue to build guns in the U.S., rugged, reliable firearms that they can be proud to sell. And we’ll continue to listen to retailers to find out what they would like to see in new products. We’re asking them all the time, and their feedback is prominent in our engineering and planning meetings.
SSR: Is the bloom off the rose for concealed carry products?
Fifer: The NSSF did exhaustive research to profile new shooters. What it found was that shooters were younger and more diverse, and there were more women. And after a couple decades of decline, the sale of hunting licenses is up about 6 percent across America. That’s certainly significant.
Many new shooters come in to look for a personal defense weapon, but then they discover how much fun it is to shoot. When they do that it opens the door for them to buy many more guns in the future.
SSR: And Ruger has branched out into crossbows!
Fifer: We purchased a minority interest in the crossbow company Kodabow. It’s a start-up. It’s struggling along. We wish it the very best, but we don’t manage it. We’re just a minority investor. We’re on the sidelines hoping it will do well, but we think crossbow hunting is an exciting development where it is being adopted.
SSR: Has the Internet changed the way we buy and sell firearms and accessories?
Fifer: My observation is that digital marketing is becoming more and more important. We see the biggest spike in sales, though, when we’re on the cover of a good gun magazine. So at the moment, print still wins the day.
There are a certain number of “basement bandits,” guys still living in their mother’s basement and writing exhaustive opinions about guns they’ve never held and certainly haven’t shot. They publish their opinions on the Internet. It’s trying to get past the noise these guys make and get the message out to the consumer about the qualities and excitement of a new gun — that is a challenge these days.
We’ve actually had consumers go to a store, fall in love with a gun, buy it and then go home and research it on the Internet. They come away alarmed because some basement bandit has written some awful article about it, but my usual response to them is, “Go shoot it!” They almost always come back and say, “Wow, I love this gun.”
Just go shoot and enjoy it. There’s more garbage on the Internet than there is sound, unbiased commentary.
I go out of my way to encourage people to go to their local gun store, hold and handle a gun they’re interested in and to buy it there. It’s just not worth trying to save five or 10 bucks trying to buy a gun online — money you’re going to lose in the transfer fee, anyway. It’s so much better to hold a gun, dry fire it, be educated on it by a knowledgeable store clerk — you’re much better off. The Internet purchase of firearms is just not a good investment for the consumer.
SSR: Long term, how do you evaluate the future of the shooting sports?
Fifer: We can’t let our vigilance down. Many people today don’t know where their food comes from and therefore join the anti-hunting ranks. When I first came to Connecticut 35 years ago, on opening day of deer season cars lined the roads and hardly anybody went to work.
Now it’s almost impossible to hunt deer with a firearm in Connecticut because of all the regulations they’ve put in place to try to make gun hunting impossible. Hunters have to be vigilant and fight back against any regulations that would make it harder to hunt.
Connecticut is an example of where anti-gun and anti-hunting people have really won the day, but now the state is overrun with deer and there’s more automobile accidents with deer, so maybe people will wake up to the fact that they’ve been foolish.
A lot of ranges have opened in recent years, and we ought to go out and support them. There are new competitions that didn’t exist 10 years ago, too. People ought to participate, because that’s how we preserve and protect what we have.
There’s one more thing we need to do. Each of us needs to introduce 12 new people to shooting every year, people who have never shot a gun before. Make it a personal goal. It’s very rewarding, because after the first couple shots these people turn around and give you this great big smile. Even if those people don’t become avid shooters, they will help us protect our right to shoot because they will understand it better than they did before. It’s a terrific way to influence the total firearms situation.
SSR: You had a great program a couple years ago called the “Million Gun Challenge” where you donated $1 to the National Rifle Association’s Institute for Legislative Action for each Ruger sold between the NRA’s 2011 and 2012 Annual Meetings. How much did Ruger actually donate?
Fifer: On April 13, 2012, we gave the NRA a check for $1,253,700.
Editor’s Note: This interview was conducted before Sturm, Ruger & Company’s 2014 third-quarter earnings were announced. The company said its earnings had dropped 42.5 percent year over year, sending shares down 8 percent.