Smith Wesson Brands Inc (SWBI) Q1 2026 Earnings Report

Revenue and profitability overview:
- Revenue (net sales): $85.1 million in QQ1 2026, down 3.7% versus the prior year comparable quarter. Management highlighted a promotional environment but noted the year-over-year decline was modest given seasonality and product mix; the CFO emphasized robust sell-through and healthy distributor inventory dynamics. Note: an external metrics table in the data suggests broader YoY declines (−46.54%) in one metric set, but the company’s own narration cites a modest YoY reduction of 3.7% for the quarter.
- Gross margin: 25.9% (reported 25.91%), down from the prior year due to lower absorption from reduced production and a roughly 120 basis point tariff impact linked to steel costs. Partial offset from lower promotional activity and favorable tax audit outcomes. This implies margin compression driven by input costs and production absorption dynamics.
- Operating income: −$3.0 million, with an operating margin of −3.5%. This reflects the revenue shortfall and higher relative fixed-cost absorption during the quarter.
- EBITDA: Approximately $5.5 million (per the company data); the management call referenced EBITDA of $8 million in the quarter.
- Net income and EPS: Net income of −$3.41 million with an EPS of −$0.077. The quarterly loss reflects the revenue shortfall, higher interest expense from increased borrowings, and ongoing operating constraints.
- Cash flow and liquidity: Net cash provided by operating activities was −$8.11 million; free cash flow was −$12.40 million. Cash at period-end was $17.96 million with total borrowings (line of credit) of about $95 million. Net debt stood at roughly $111.40 million after applying cash balances. The firm spent ~$4.29 million on capex and paid a $5.90 million dividend during the quarter. Management cited a net working capital decline of about $24 million as a contributor to negative operating cash flow.
- Inventory and product mix: Distributor inventories declined by over 10% from the end of the prior quarter and by over 13% year over year, signaling strong sell-through and a favorable positioning for the traditional firearm season. Handgun ASPs declined modestly, while long-gun ASPs declined more meaningfully due to product mix and promotional activity.
- Strategic initiatives and innovation: New products accounted for 37.3% of sales in the quarter, with Shield X generating positive feedback since its late-July introduction. The company continues to emphasize a robust product pipeline and value-led marketing to defend leadership positions in core categories.
- Balance sheet and capitalization: Long-term debt around $127.4 million; total debt $129.36 million; equity remains robust at $364.4 million. Liquidity remains a concern given negative operating cash flow; the firm’s capital allocation priorities include investments in Tennessee manufacturing and Massachusetts upgrades, while preserving a strong balance sheet and returning value to shareholders.