A sharp decline in demand for firearms contributed to Sturm, Ruger & Co. experiencing a 59% plunge in second-quarter net income to $6.2 million.

Diluted earnings were 35 cents, down from 86 cents a year ago. There were no earnings forecast from Zacks Investment Research.

Ruger released the report after the stock market closed Wednesday. Investors sent the share price down as much as 9.5% in after-market trading, which typically foreshadows early trading the next day.

Christopher Killoy, Ruger’s chief executive, said that “thus far, 2019 has been challenging for the firearms industry.”

Ruger reported firearms sales tumbled 25.2% to $94.9 million.

“Our internal surveys of distributors and retailers indicate that the overall market for new firearms in the first half of the year may have declined more than the adjusted NICS data would indicate,” Killoy said.

The National Instant Criminal Background Check System background checks declined 5% in the second quarter, reflecting overall decreased consumer demand for firearms.

Firearms sales surged in the months after President Barack Obama’s 2008 and 2012 victories out of some gun owners’ fears that Obama might pursue tighter firearms restrictions.

Sales have slumped industry-wide since the Trump administration took office in January 2017 with a pro-gun policy that eased fears of heightened restrictions under a potential president Hillary Clinton.

Tony Plath, a retired finance professor at UNC Charlotte, said it is likely the firearms sales slump will continue well into 2020.

"What happens in 2021 depends on whom we put in the White House next fall," Plath said, "If we reelect Trump, demand for guns stays weak through 2024.

"If we elect Joe Biden, a moderate Democrat, demand will strengthen somewhat. If we elect progressives Sen. Kamala Harris (D-Calif.), Elizabeth Warren (D-Mass.) or Bernie Sanders (I-Vt.), gun demand will soar in early 2021."

The profit decline came despite Ruger benefiting again from lower income-tax expenses, $2.2 million compared with $4.9 million a year ago. The federal corporate tax rate cut went into effect Jan. 1, 2018.

Ruger said contributing factors to the sales decline included: a formerly significant distributor filing for bankruptcy protection in June; increased sales of used firearms at retail; and decreased retailer inventories “as the anticipation of further discounting led to cautious buying behavior by retailers.”

“Despite the softness in demand, we will not go down the path of quick fixes, deep discounting and reckless extension of payment terms in an effort to generate better short-term results at the expense of the long term, disciplined execution of our strategy,” Killoy said.

Killoy said during a conference call with analysts Thursday that "we had some strong programs out there to allow retailers to buy Ruger guns at a discount."

"But they are same programs offered throughout the year to all retailers, and candidly we didn't cut any deals, we didn’t offer any extended payment terms, and we ... may have paid a short-term price for that."

Analysts with Zacks Equity Research analysts have said Ruger has been able to offset some of the firearms-sales decline by shifting its production focus toward concealed-carry products and modern sporting rifles.

These products, such as the Wrangler, Pistol Caliber carbine, EC9 pistol, Precision Rimfire Rifle and Security-9 pistol, represented 25% of firearm sales, or $22 million, in the quarter.

One ripple effect from the sales decline has been Ruger eliminating 700 jobs, or about 28 percent of its workforce, since Jan. 1, 2017.

Ruger has a major production plant in Mayodan, with 315 employees at last count. Its headquarters is in Southport, Conn., along with production operations in Earth City, Mo., Newport, N.H., and Prescott, Ariz.

Overall, the company had 1,830 full-time employees as of Feb. 1 as disclosed in its fiscal 2018 report. The company did not list its workforce totals in its two second-quarter filings.

Killoy told analysts that "in response to the reduced production of the second quarter, we were proactive in managing our workforce."

"We let attrition reduce our workforce. Overtime was reduced. We took two additional shutdown days in the second quarter and we will take three shutdown days, in addition to our normal annual weekly shutdown, in the third quarter."

The board of directors declared a quarterly dividend of 14 cents, payable Aug. 30 to shareholders registered as of Aug. 15. The dividend typically represents 40% of the quarterly net income.

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rcraver@wsjournal.com 336-727-7376 @rcraverWSJ

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