Ammunition manufacturer Ammo Inc. is building a new factory as American consumers deal with an ongoing ammunition shortage caused by unprecedented demand for guns.
While a new factory is welcome news to gun consumers, it won’t go online fast enough to solve this year’s problem of overwhelming demand versus limited supply.
Arizona-based Ammo Inc. broke ground on a 160,000 square foot factory on June 21 in Manitowoc, Wisconsin. A new plant from an upstart U.S. manufacturer is a ray of hope for gun enthusiasts, who have been scouring gun stores for ammunition and finding bare shelves, especially for popular calibers like .22 for target shooting, 9mm for pistols and .223 for AR-15s.
Ammo Inc Chief Executive Officer Fred Wagenhals joked at the groundbreaking that he was the only one of his co-founders who “knew what a gun was,” according to a local news broadcast, which says the company plans to finish the project in 2022, bringing 300 jobs to the town.
Ammo Inc. did not respond to messages from Forbes.
It seems like good timing for the groundbreaking (which was also attended by former NASCAR driver Rusty Wallace, a board member of Ammo Inc.) Americans have been buying millions of guns and stockpiling ammunition since the coronavirus pandemic swept through the country early last year. Gun sales have soared to record heights, according to earnings reports from leading manufacturers Smith & Wesson and Sturm, Ruger, and background checks from the Federal Bureau of Investigation.
“They’re certainly riding a historic surge in consumer demand for ammunition in the past year, following the spike in U.S. firearm sales since early 2020,” said Rommel Dionisio, a gun industry analyst for Aegis Capital. “Firearm sales, initially spurred by increased concerns over personal safety in the wake of widespread civil unrest, are currently being driven by heightened consumer fears over potential tightening of gun control legislation under the Biden Administration.”
Biden has been planning to crack down on semiautomatic weapons, referred to as assault weapons or modern sporting rifles, which are made by Smith & Wesson, Sturm, Ruger, and many other companies. He’s also targeting high-capacity magazines, which can hold more than 10 rounds and are made by MagPul, ProMag and other companies. Assault weapons, including AR-15s, have been used in many mass shootings. Pistols, including Glocks, have also been used in mass shootings. But AR-15s are also used by the U.S. military, and Glock pistols are popular with police officers.
The gun control movement has lots of support but faces considerable opposition. A federal appeals court recently shot down federal regulations that would ban the sale of handguns to people under 21, ruling that it violated the Second Amendment.
Also, gun advocates oppose Biden’s nomination of David Chipman as the leader of the Bureau of Alcohol, Tobacco, Firearms and Explosives, given his recent role as an advisor for Giffords, the gun control group founded by former Rep. Gabby Giffords (D-Ariz.) Giffords, who owned a Glock, was wounded in 2011 in a mass shooting by a man armed with a Glock and a high-capacity magazine.
Gun sales are also being driven by fear, since coronavirus upended the economy and America gave way to violent protests, gun violence, hate crimes versus Asian-Americans, and the storming of the U.S. Capitol. Millions of Americans have been buying guns for self-protection, including growing numbers of women, Asian-Americans and Black Americans.
Strong firearms sales are typically accompanied by robust ammunition sales. Some retailers told Forbes that sales would be even stronger, if only they had the inventory to sell.
But consumers who are waiting for some relief from ammunition shortage will have to wait a while longer. Dionisio said it takes at least six months to be build an ammunition factory.
“Not only are the installations of machinery, production lines, warehousing, and shipping infrastructure involved, but also there are environmental and waste issues to consider,” said Dionisio.
The ongoing demand has placed a strain on the supply chain, which was already weakened by the pandemic and an international scrap over raw materials like copper.
Ammo Inc. was created in 2016 and went public in 2017 under the Nasdaq ticker POWW. The stock price has more than doubled year-to-date. Roth Capital analysts initiated coverage of the company in April and recently rose its target price to $11 from $9, rating the company a “buy.”
Ammo Inc.’s groundbreaking follows another big move in the ammunition manufacturing industry that occurred in 2020, when Vista Outdoor, the leading U.S. ammunition maker, acquired an ammunition plant in Arkansas from Remington. Remington is a venerable gun company that has filed for Chapter 11 bankruptcy protection twice.
Vista Outdoor is a profitable giant with dozens of brands leveraged across shooting and non-shooting sports. In addition to Remington, Vista owns ammunition brands CCI, Estate Cartridge, Federal and Speer. It also has brands that are unconnected to the gun industry, including CamelBak hydration products and Bell bicycle helmets. It also has the Bushnell brand, which makes rifle scopes, binoculars and laser rangefinders for golf.
Ammo Inc., in addition to its ammunition production, also has Gunstore.com, an online portal for the buying and selling of firearms, including semiautomatic pistols, AR-15s and Kalashnikov assault rifles. Guns can be ordered online, though the firearms are shipped to local gun stores for pickup and background checks, instead of direct shipping to private homes.
Vista Outdoor is much bigger than Ammo Inc. On May 6, Vista Outdoor announced quarterly sales of $403 million and annual sales of $2.22 billion. On June 29, Ammo Inc. reported quarterly sales of $24.2 million and annual sales of $62.5 million. These were hefty increases for Ammo Inc., which reported a quarterly sales increase of 409% and an annual increase of 300% in sales, compared to the year before.
More importantly, Vista is profitable and Ammo is not. While Vista reported net income of $266 million for the year, Ammo reported an annual loss of $14.55 million.
But this will change, according to Wagenhals, who announced on July 8 that he expects Ammo Inc to report its first net profit during the quarter that ended June 30. The company will release those earnings Aug. 16.
Meanwhile, Vista is scheduled to report its quarterly earnings on July 29. Olin, an industrial adhesives company that owns the Winchester ammunition brand, will report its earnings on July 27.
Despite the manufacturing expansions, retailers and analysts says that it could take a long time for ammunition supply to catch up, even if demand eventually calms down.
“Ammunition availability is still a concern and the factors that were at play last year are still having an effect,” said Mark Oliva, public affairs director for the industry group, the National Shooting Sports Foundation. “Ammunition manufacturers are expecting these market conditions to be with us for one to two years.