Smith & Wesson Brands (NASDAQ:SWBI) executives highlighted third-quarter fiscal 2026 results they said exceeded expectations, pointing to continued market share gains in handguns, resilient pricing, and stronger cash generation as the company reduced debt and maintained distributor inventory at targeted levels.
Quarterly results and profitability
President and CEO Mark Smith said the company was “very pleased” with third-quarter performance, citing higher unit shipments and strong average selling prices (ASPs) that supported margins and cash flow. Net sales rose 17.1% year-over-year to $135.7 million, while adjusted EBITDA increased nearly 21% to $16.8 million. Adjusted earnings per share were $0.08, up from $0.03 a year earlier. CFO Deana McPherson reported GAAP EPS of $0.08 versus $0.05 in the prior-year quarter, with net income of $3.8 million compared with $2.1 million.
Handguns drove growth and share gains
Management described handgun performance as a key driver in the quarter. Smith said handgun unit shipments into the sporting goods channel increased 28% while adjusted NICS checks declined 2.2% over the same period. With distributor weeks of supply remaining flat, Smith said the company viewed the results as “significant market share growth.”
Smith and McPherson said multiple factors supported handgun results, including demand for newer products and a favorable mix shift toward higher-priced models. Smith also pointed to a modest price increase implemented late in the quarter, effective January 1, which he characterized as 2%–3%.
New products represented 44% of handgun shipments during the quarter, according to Smith. He said the company continued to see success with the Bodyguard platform, but added that growth was seen across the entire semi-auto pistol line, including newer models outside the subcompact space that are positioned at higher price points.
Handgun ASPs increased 5.2% year-over-year to more than $419 and were also above second-quarter levels. McPherson said ASPs were up slightly versus Q2 due to strong demand for certain premium products, offset by the strength of some lower-priced offerings.
Long guns reflected strategy and tougher comparisons
In long guns, Smith said results were consistent with the company’s positioning in categories where it actively competes. Long gun shipments into the sporting goods channel declined 25% while overall adjusted NICS was down 5.6%. Smith attributed the year-over-year decline largely to channel fill in the prior-year quarter tied to new caliber introductions for the higher-end Model 1854 lever-action rifle, combined with industry dynamics in which the hunting segment outperformed the self-defense segment—a category where Smith said Smith & Wesson’s product line is more heavily weighted.
New products represented 28% of long gun shipments. Smith said long gun ASPs were $535, down about 11% from a year earlier, primarily due to mix, with the prior-year period including higher-priced new product introductions for the Model 1854. McPherson similarly said long gun ASPs fell about 11% due to lower volume of certain higher-priced products, driven by the prior-year channel fill.
Cash flow, inventory, and debt reduction
The company reported a significant year-over-year improvement in operating cash flow. Smith said operating cash flow was up more than $30 million from the prior year. McPherson reported cash generated from operations of $20.5 million versus cash used of $9.8 million in the prior-year quarter, driven primarily by lower inventory. Inventory declined $7.9 million during the quarter, compared with an increase of $2.9 million in the prior-year quarter.
Smith said internal inventory ended the quarter at $175 million, down $23 million versus the prior-year third quarter. He also said distributor inventory levels remained flat at approximately nine weeks of supply, which management indicated is in line with its target.
On the balance sheet, Smith said the company ended the quarter with $75 million in debt, down from $90 million at the end of the second quarter, and that it paid down an additional $20 million after the quarter ended. McPherson said the company ended the quarter with $23.5 million in cash and investments and $75 million in borrowings on its line of credit, with borrowings later reduced to $55 million following the subsequent repayment.
Capital spending was $3.6 million in the quarter, compared with $6.3 million a year ago. McPherson said the company expects full-year capital spending of $25 million to $30 million. The company paid $5.8 million in dividends during the quarter, and the board authorized a $0.13 quarterly dividend payable April 2 to stockholders of record on March 19.
Outlook and operational priorities
Looking ahead to the fourth quarter, McPherson said the company expects sales to be up 10%–12% over the fourth quarter of fiscal 2025, with a small reduction in channel inventory as distributors plan for slower summer months. With eight additional operating days compared with Q3 and increased production, she said the company expects fourth-quarter gross margin to increase by several percentage points over Q3 and by “a point or two” over last year’s fourth quarter.
Operating expenses in Q4 are expected to be about 10% higher than the prior-year fourth quarter due to higher research and development, stock compensation, profit sharing, and other profit-related costs. McPherson said the effective tax rate is expected to be approximately 29%, and she also projected continued healthy cash generation in the fourth quarter.
Pricing actions, promotion discipline, and law enforcement momentum
During the Q&A, management provided additional detail on pricing and demand. Smith said the price increase effective January 1 was largely across the board, with variations by category based on demand and positioning, and that overall it was “pretty close to 3%.” He said the increase saw no pushback from customers and had no negative impact on demand.
Smith also discussed long gun opportunities, noting that tax stamp changes effective January 1 were helping the short-barreled rifle (SBR) category “a little bit.” He added that, while the company was pleased with performance for the Model 1854, there is “a lot of white space” in long guns that the company continues to evaluate for long-term opportunities.
On the professional channel, Smith said the Smith & Wesson Academy—launched six months ago—was exceeding expectations and contributing to momentum in law enforcement sales. He said the company had shipped to nearly 1,000 federal, state, and local law enforcement agencies in the past 18 months and described a strong pipeline, while noting the law enforcement sales cycle is longer than the consumer market. Smith added that the opportunity extends beyond domestic law enforcement to federal agencies and “outside into foreign militaries as well,” while emphasizing the channel remains a smaller portion of the business today.
About Smith & Wesson Brands (NASDAQ:SWBI)
Smith & Wesson Brands, Inc is a leading American manufacturer of firearms and related products, designing, producing and marketing a broad array of handguns, long guns and shooting accessories. The company’s portfolio includes revolvers, semi-automatic pistols and rifles under well-known brands such as M&P® (Military & Police) and Performance Center®, which are used by military, law enforcement, commercial and private customers. In addition to complete firearms, Smith & Wesson offers suppressors, optics mounts, holsters and other shooting accessories to support a full spectrum of professional and recreational shooting activities.
Founded in 1852 by Horace Smith and Daniel B.
