0001193125-26-093991
SEC filingSmith & Wesson's Q3 FY26 revenue grew 17% to $135.7M, driven by new handgun product launches and price increases, with net income up 79% to $3.8M.
For the three months ended January 31, 2026, Smith & Wesson reported net sales of $135.7 million, a 17.1% increase compared to $115.9 million in the same period last year. The growth was driven by a 34.6% surge in handgun sales to $107.4 million, which benefited from new product introductions (44% of handgun sales), a shift to higher-priced models, and a 2-3% price increase. Long gun sales declined 30.4% to $19.3 million due to timing of new launches and lower consumer demand. Gross profit rose 27.3% to $35.6 million, and gross margin expanded 210 basis points to 26.2%, primarily due to improved fixed-cost absorption from higher production volumes, lower promotional costs, and a favorable firearms excise tax audit outcome, partially offset by higher tariffs and labor costs.
Operating income increased 41.5% to $6.7 million, with operating margin rising to 4.9% from 4.1%. Net income jumped 78.5% to $3.8 million, or $0.08 per diluted share, compared to $2.1 million ($0.05 per share) in the prior-year quarter. On a nine-month basis, revenue grew 3.5% to $345.5 million, but operating income fell 26.8% to $7.9 million and net income declined 52.9% to $2.3 million ($0.05 per share), reflecting higher operating expenses and lower gross margin year-to-date.
As of January 31, 2026, cash and cash equivalents totaled $18.4 million, down from $25.2 million at April 30, 2025. Total debt (notes and loans payable) stood at $74.1 million, compared to $79.1 million at year-end. The company had $75.0 million drawn on its $175.0 million revolving credit facility, bearing interest at a weighted average rate of 5.75%. Inventory decreased $14.6 million to $175.3 million due to proactive management. Total assets were $538.0 million, down from $559.6 million, primarily due to the retirement of $31.7 million shares of treasury stock and reduced inventory. Stockholders' equity was $363.4 million, compared to $372.5 million at April 30, 2025.
For the nine months ended January 31, 2026, cash provided by operating activities was $39.6 million, a sharp improvement from a use of $48.1 million in the prior-year period, driven by a $87.9 million reduction in working capital usage, particularly inventory ($53.0 million improvement). Capital expenditures were $18.9 million, leading to free cash flow of $20.7 million (computed). Financing activities used $23.0 million, including $17.4 million in dividends and $5.0 million net debt repayments. No share repurchases occurred in the current period.
Management attributed the quarterly revenue growth to strong handgun demand and new product success. The company highlighted that new products represented 38.7% of net sales. Gross margin benefited from lower promotional costs and audit-related excise tax benefits. Inventory levels are expected to decline further in the remainder of fiscal 2026. Capital expenditures for fiscal 2026 are guided at $25-$30 million, largely for the Smith & Wesson Academy. The company noted that the One Big Beautiful Bill Act (OBBBA) will not materially impact financial statements. Key risks include tariff pressure (estimated 160 bps impact on gross margin in the quarter), litigation uncertainties, and excess channel inventory.
Smith & Wesson operates as a single reportable segment: firearms. There were no common stock repurchases during the quarter. The Board declared a $0.13 per share quarterly dividend, payable April 2, 2026. Stock-based compensation expense for the nine months was $6.4 million. The company retired 31.7 million treasury shares during the quarter, reducing common shares outstanding to 44.5 million. An immaterial error correction was made to prior-period general and administrative expenses (overstated by $1.5 million for nine months ended January 31, 2025). Legal proceedings include multiple product liability and regulatory cases; management believes adequate accruals are provided for defense costs but cannot reasonably estimate potential loss ranges for adverse judgments.