According to the Small Arms Survey, the United States is the world leader in per capita civilian gun ownership with an estimated 89 guns per 100 Americans. This ubiquity of firearm ownership in the US is both a revered and abhorred aspect of modern day Americana, especially in light of the recent tragedies at Newtown, Connecticut and Aurora, Colorado. Despite this controversy, the US gun industry is still going strong. In 2014, there were 20.968 million National Instant Criminal Background Checks (which acts as an imperfect proxy for new gun sales) submitted to the FBI electronically, down slightly from 21.093 million in 2013. This article will examine this $14 billion dollar industry in America, its production figures, and the key players behind this business. 

Production

According to the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF), over 8.5 million firearms were produced in the United States in 2012, up over two million units from 2013’s figures. The boom in gun production has ironically been attributed to President Obama’s efforts to introduce gun control measures in the wake of the Sandy Hook school shooting. That is to say that prospective buyers fearing a restriction on assault weapons began to stock up on guns in an effort to beat the ban.

However, this surge in domestic demand did not carry over to the US’s international customers, as firearms exports actually decreased by 9334 units in 2012 from 2011, to 287,554. According to information from the Freedom Group's 2014 annual Securities and Exchange Commission report (10-K), commercial firearms and accessories production is a lucrative business, worth $14 billion in 2013 figures, and according to the National Shooting Sports Foundation (NSSF), as of 2014, the industry is responsible for some 263,000 jobs through primary and ancillary means of employment. These figures translate to total industry wages (including ancillary employment) of $13.7 billion, and the industry as a whole brings in almost $5.8 billion in taxes to the government’s coffers. The two charts below illustrate a breakdown of the US firearms industry based on 2012 figures from the ATF. As evident from the data, pistols and rifles make up the majority of domestic and export production figures:

Graph 1-A: Total Firearms Manufactured in the United States, 2012 

 2012

Source: ATF

Graph 1-B: Firearms Exported from the United States, 2012

 2012

Source: ATF

Graph 1-C (below) is pulled straight from the ATF Firearms Commerce Report (2014). It shows that US firearms production has been steadily increasing since 2001 and, based on 2012 numbers, is currently at an all time high:

US firearms production 1986 to 2012

Supply

Unlike manufacturing data, estimating the total supply of firearms in the United States poses many challenges. According to the Wall Street Journal, gun ownership polls offer wide variances in data, with some reporting as little as 50 million Americans owning guns, while others report numbers up to and over 90 million. Moreover, some polls show a steady decline in gun ownership. Polls by Gallup reported that, as of 2012, as many as 43 percent of Americans homes had firearms, contrary to the 33 percent of households as reported by the General Social Survey. These discrepancies raise the question of whether it is actually gun ownership that is declining, or are gun owners simply less inclined to reveal their ownership given the political climate and possible introduction of gun control measures.

The actual count of guns has also proven to be quite difficult to ascertain. A 2004 telephone survey, overseen by the Harvard School of Public Health, polled 2,770 adults and extrapolated that there were roughly 280 million guns owned by Americans. However, if the survey had included answers from the three percent of respondents who reported 25 or more guns in their household, then the figure would be well over 300 million. Another study conducted by the Small Arms Survey, based on data from the ATF and US Census Bureau, estimated that over the 25-year time span from 1986 to 2010 there were around 146 million guns in domestic circulation. However, this number does not account for true attrition (as theft-related attrition simply re-circulates the stolen firearm), such as discarding, damaged beyond repair, irretrievably discarded, or otherwise rendered unusable because this number is simply impossible to ascertain. Even if using a 10 percent assumed rate of attrition, that still brings the total number of firearms in circulation to over 130 million in the aforementioned 25-year time span.

Furthermore, as firearms are durable and can last for longer than 25 years, the Small Arms Survey report gives credence to the conclusion reached by the Harvard study. 

Market Shares

According to the Small Arms Survey, even though the ATF officially recognized 2,228 federal firearms licensees (‘’firms”) from 1986 - 2010, the industry is heavily segmented with only 26 firms producing products in all four categories of firearms: pistols, revolvers, rifles and shotguns. And in terms of market share, 40 percent of the American gun industry is dominated by three firms: The Freedom Group, Sturm, Ruger and Co., Inc. (RGR) and Smith & Wesson Holdings (SWHC). See table below:

Number of product categories amongst gun producers

The Freedom Group is a private holding company that owns such notable brands as Bushmaster, Remington, and DPMS. According to its 10-K, through the Remington brand, the Group takes the number one spot for long guns and modern sporting rifle sales in the United States. They hold the number three spot in terms of ammunition sales with around 2.8 billion and 3.1 billion rounds of ammo during the 2014 fiscal year. The Group also employs 3,200 full time employees and made $939.3 million in sales in 2014, down 26 percent from $1.268 billion from FY 2013. 

Shown below is a table of all the brands owned by the Freedom Group and their dates of acquisition:

Freedom Group brands

Sturm, Ruger & Co., Inc. is a publicly traded company with a

of $1.2 billion and $542.3 million in sales for FY 2014 (down 20 percent from 678.5 million in 2013). According to its 2014 10-K, the Company employs 1,843 full-time staff and derives all but one percent of its sales from firearms (the one percent is revenue earned through castings). The graph below shows the hypothetical returns on a $100 investment with Sturm, Ruger verses their public competitor, Smith & Wesson, as well as the S&P and Value Line Recreation Index as benchmarks. 

RGR vs competition

Source: Sturm, Ruger & Co.’s 2014 10-K

Smith & Wesson is another publicly traded company with an $812.92 million market cap and $626.62 million in sales for FY 2014, up six percent from $587.514 million in 2013. Handgun sales accounted for $423 million or 67.5 percent of net sales in 2014, while long guns accounted for $155.3 million or 24.8 percent of net sales. Sales of other products and services and sales from their partnership with Walther account for 6.8 percent and .9 percent of their total net sales respectively. As of May 2014, the company employs 1,758 full-time employees, with 38 workers employed in research and development roles to help facilitate new product launches in FY 2015. 

The tables below from the Small Arms Survey, illustrate the total number of firearms produced by their respective manufacturers between 1986 and 2010:

Total production of large scale firearms manufacturers 1986- 2010
Total production of large scale firearms manufacturers 1986- 2010

The Bottom Line

The firearms industry in the US is a $14 billion enterprise that employs thousands of people and contributes billions of dollars in tax revenues. Although it remains to be seen if tougher gun control measures will be introduced in the future, with an estimated 300 million firearms owned by Americans, it is apparent that any potential regulations for this industry will be met with stiff resistance. For now, guns are here to stay and the debate about the Second Amendment remains a salient aspect of American culture.