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xtriggerman

USC (United Sporting Companies) goes belly up.

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 Hey, I just got this and if its true, this is a huge shock wave to the industry. Liquidation of millions of dollars in guns and related stuff is going to put a hurt on the normal inventories of other retailers. Unless some outfit scoops this entire inventory up only to hold wholesale on it, things can get interesting on the open market.  Back in 82, my distributor was Ellet Brothers! Sorry to see it all fold up like this.....

June 12, 2019

On Monday, a major American firearms dealer which staked its future on the election of Hillary Clinton in 2016 declared bankruptcy and its intention to liquidate.
United Sporting Companies Chief Executive Officer Bradley Johnson admitted in a court filing that USC, which was founded in 1933 as Ellett Brothers before merging with Jerry’s Sports, Inc. in 2009 and formally changing its name to United Sporting Companies, Inc. in 2010, hiked its inventory before the election of Donald Trump. They figured that once a Democrat was elected, gun sales would soar because of the Democrats’ typical hostility for guns and avowed determination to restrict gun sales.
The court filing stated:
In the lead up to the 2016 presidential election, the Debtors anticipated an uptick in firearms sales historically attributable to the election of a Democratic presidential nominee. The Debtors increased their inventory to account for anticipated sales increases. In the aftermath of the unexpected Republican victory, the Debtors realized lower than expected sales figures for the 2017 and 2018 fiscal years, with higher than expected carrying costs due to the Debtors’ increased inventory. These factors contributed to the Debtors tightening liquidity and an industry-wide glut of inventory.

An over-supply of firearms following the 2016 presidential election and the financial distress of certain market participants led to industry-wide sales discounts. The Debtors were forced to lower prices to remain competitive and maintain sales figures, which further eroded the Debtors’ slim margins and contributed to the Debtors’ tightening liquidity.

The Daily Mail reported of Johnson, “ … he said the Republican Trump's unexpected win over Democrat Hillary Clinton was a factor in net sales falling to $557 million in 2018 from an average $885.3 million from 2012 to 2016, with an accompanying glut of inventory.” 

Other reasons cited by the company for its bankruptcy filing included Bass Pro Shops' merger with Cabela's, Gander Mountain's bankruptcy, and Dick’s Sporting Goods’ losses, all of which meant that USC had a harder time because vendors and manufacturers were less willing to extend credit to them.

The company stated it had between $100 million and $500 million of liabilities. USC’s stock included Remington, Ruger, Browning, Winchester, Smith & Wesson, Glock, Bushnell, Sig Sauer, Springfield Armory, Hornaday, Henry, Magpul, Armscor, MotorGuide, Minn Kota, Lowrance, Federal, CCI, Taurus, and Leupold. USC has 20,000 independent retailers covering all 50 states.

 
 
According to the Post and Courier:
The majority owner is Wellspring Capital Management, a New York private equity firm that’s bought the business in 2008 and is now facing a lawsuit over its handling of tens of millions of dollars in borrowed funds. Prospect Capital Corp. is alleging that the $160 million in financing to provided Ellett Brothers in 2012 and 2013 was never invested in the business, according to the complaint it filed May 23 in Lexington County.

At the end of March, The Daily Wire reported that according to Bloomberg, Dick’s Sporting Goods, the country’s largest sports retailer, lost $150 million in 2018 after the company decided to stop selling assault-style rifles and high-capacity magazines.

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Whaaaaatt?? Gun manufacturers taking a hit by a distributor going under? That’s not possible is it?

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Ellett Brothers was one of the biggest distributors out there. That loss will be felt across the industry - and it may be a bellwether of dark times ahead.

 

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36 minutes ago, MacGyver said:

Ellett Brothers was one of the biggest distributors out there. That loss will be felt across the industry - and it may be a bellwether of dark times ahead.

 

Why? Other than the inventory impacted in this case; how could this impact or cause “dark times” ahead? :confused:

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Prices are about to drop further I would assume...I feel bad for dealers already loaded up on inventory...."happy days are here again for the bargain hunters" but please...buy now or at least don't gripe the next time (likely years from now) prices shoot through the roof.  You wanna load up these are the times to do it.

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12 minutes ago, Magiccarpetrides said:

Prices are about to drop further I would assume...I feel bad for dealers already loaded up on inventory...."happy days are here again for the bargain hunters" but please...buy now or at least don't gripe the next time (likely years from now) prices shoot through the roof.  You wanna load up these are the times to do it.

Absolutely. During the ammo shortage so many were upset that the ammo manufacturers didn’t add equipment. Had they done that they would be in a jam now. There is no shortage of ammo.

The prices are down on new firearms and I would expect sales are near non-drama levels of the past. But that’s low by Obama era standards.

My opinion is that gun distributors add no value to the end user; just cost. I suspect at some point most of the gun manufacturers will bring distribution in-house. That will be a win for us all.

I’ve not slowed down on buying guns. I’m just buying more of them new than before; because the price of used has yet to drop.

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I have not been gun shopping for some time. I might need to do a litle just to see whats out there I might can afford...............:shrug:

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9 minutes ago, DaveTN said:

My opinion is that gun distributors add no value to the end user; just cost. I suspect at some point most of the gun manufacturers will bring distribution in-house. That will be a win for us all.

I agree that distributors are a leach in the system.  I wouldn't expect the OEM's to bring distribution in-house, as that would increase their overhead at a time when they're doing everything they can to reduce it. I would expect the business model to change, perhaps to consigned inventory similar to car dealers.  

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I understand YoY forecasting, but unless something dramatically changes on the political level, many gun owners are reaching saturation levels and being more selective when adding new stuff.

I assume the firearm, ammo and accessory manufacturers are slowing production, but it takes time.

They missed a lesson from the car business, it's cyclical. I think they assumed it'll never stop.

I'll keep me eye out for even cheaper ammo opportunities

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Its clear the ammo folks are more dynamic and have adjusted well. They seem to appreciate the cyclical nature and are bringing their margins back by keeping output lower.

So while folks hope for prices to drop, I personally don't expect it to be substantial, and nothing like the gun glut. Ammo is a consumable and inventories are easier to modulate on their side. You have to keep buying ammo, not guns.

I don't believe we will see prices getting to the lows of 2016-17 levels.

Looking at examples, there was a bit of surplus building thru 2017 as the 9mm and 223 production ramped up post Sandy Hook frenzy. Ammo prices back then were lower for desirable calibers on top of plentiful recurring manufacturers rebates. It was not uncommon to end up with .17 - .18 cents per round (cpr) for quality brass 223/5.56 for example. Looking at todays prices, you can see they have slowed production some time ago to run out surplus, 6 months ago  deals were hard to find and most decent stuff was running at 28 to 30 cpr to your door without any incentives. Now its down to .26 but incentives are rare.

The LEO switch to 9mm on top of production cuts also seem to raise price for several months. Fortunately looks like they anticipate supplying the LEO need and resulting switch of the gunmarket to follow the trend and mass exodus from .40. Its an area they are increasing output seeing high demand. Prices over the last couple months seem to have dropped well, but not down to levels of .12 to .14 cpr seen 2 to 3 years ago. I guess .16 to .17 cpr to your door is nothing to sneeze at, but that is a 20 to 30 percent over lows. Not black rifle  ammo's 50% ugly though.
 

 

Edited by Erich

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This was not due to Trump winning, a Hillary win may have extended this a bit but the outcome would have been the same.  This was corporate raiding, plain and simple. 

https://www.greenvilleonline.com/story/news/2019/06/11/sc-based-gun-distributor-ellett-brothers-goes-bankrupt-lawsuit-says/1420812001/

These maggots should be caged, I don't see how this can be legal.

Edited by Omega
Speeling
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 Good article! Ha, I half expected to see Wayne Lapierre get hit off on something or other... I think the bottom line of this is sort of like the old High Standard story. Manufacturers rely on bulk out going sales to distributors. So its the outfits like Remington that very well may bite the final bullet in this case.  We will see.........

Edited by xtriggerman

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