Ad Age - March 9, 2009

post strong sales increases

Sour economy, potential

for tightened regulations drive buyers to firearms

By NATALIE ZMUDA nzmuda@adage.com

CABELA’S: Retailer turned in strong fourth-quarter results thanks to firearm sales.

THE ECONOMY MIGHT be tanking, but firearm sales are going great guns.

Despite the weakest holiday season on record, outdoor-products retailer Cabela’s turned in strong fourth-quarter sales, largely as a result of an increase in firearm and ammunition sales. Smith & Wesson is reporting pistol sales up 40%, and Sturm, Ruger & Co. reported an 81% increase in firearm revenue.

In November, on the heels of Barack Obama’s election, background checks for firearm sales jumped 42% to a record 1.5 million. But that pace has not abated, with a 24% rise in background checks in December, a 28% uptick in January

and a 23% increase in February.

A new Democratic administration typically heralds a rash of gun purchases, as consumers fear the possibility of more restrictions on firearm purchases—the election of Bill

Clinton in 1992 accompanied an 18- month surge in firearm sales. But industry experts say the tough economy, along with a desire for leisure activities close to home, will ensure strong firearm sales in the coming months, regardless of the attention the Obama administration gives to gun issues.

“The continued increase in gun sales can be attributed to both political and economic factors,” said Ted Novin, director-public affairs for The National Shooting Sports Foundation. “In tough economic times, more people become concerned about security—a strong reason to purchase a firearm.

Similarly, when income is an issue, it’s reasonable to believe that hunting becomes that much more popular. Hunting in the field, as opposed to a local grocery store, ensures safe, high-protein food at a much lower price.”

Eric Zinczenko, publisher of Field & Stream and Outdoor Life, said hunting is the only hobby where you can go out and “bring your dinner home.” He added, “The ability to feed your family in these tough economic times [is] a point that we’re seeing is not lost [on consumers].”

Sales figures at a host of manufacturers and retailers are surprisingly robust, given consumers are reigning in their spending habits. Regarding Cabela’s strong fourth-quarter sales, President-CEO Dennis Highby said sales at stores open at least a year, which rose 2%, would likely have been down 1%, excluding firearm

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and ammunition sales.

“We’re excited that we have the merchandise that people want in this type of environment,” Mr. Highby said during a call with analysts. “We saw strength in ammunition, firearms; reloading was big; archery was strong. He added that those categories remained strong in the first six weeks of the year.

BassPro, a privately held company, also reports its sales are robust. Larry Whiteley, a spokesman for the company, said that the company had a “very good” fourth quarter and a strong start to 2009. Mr. Whiteley said firearm sales are up but added that the fishing category has been outperforming as well.

On the manufacturing side, publicly traded firearm manufacturers, such as Smith & Wesson and Sturm, Ruger & Co. are enjoying strong sales and relatively steadier stock prices. Smith & Wesson said aside from the 40% growth in pistol sales in its most recent quarter, tactical rifle sales soared 308%. Sturm, Ruger & Co. reported an 81% increase in firearms revenue. In a message on its website, Rock River Arms, which specializes in custom rifles and pistols, cites an “overwhelming increase in orders” in explaining why it can no longer provide estimated delivery dates, and notes that it is increasing production.

Pharma benefits from surge in sleep-aid, antidepressant prescriptions

Marketing outlays down,

but more consumers

seek relief from anxiety

By RICH THOMASELLI adageeditor@adage.com

YOU SNOOZE, YOU LOSE? Not for some pharmaceutical companies seeing big sales jumps for sleep aids and antidepressants, despite lower marketing spending in both categories.

Despite dramatic decreases in marketing, prescriptions for sleeping pills are up.

According to IMS Health, prescriptions for major sleeping-pill brands rose 7% last year, while antidepressant-brand prescriptions jumped 15%.

The economy, it appears, is keeping us up at night, according to a new

NOT-SO-SLEEPY SALES: Scripts up 7%.

“Sleep In America” poll out this week from the Washington-based National Sleep Foundation. Some 31% of respondents said they are losing sleep over the dismal economy and their own financial situation.

“The pattern certainly suggests” the economy is a factor, said Amy Wolfson, a professor at College of the Holy Cross in Worcester, Mass., and one of five members of the poll

taskforce. “There are worries about the economy and that can certainly lead to insomnia.”

Even more surprising, prescriptions are up despite a dramatic decrease in marketing—in the case of sleeping aids, by hundreds of millions of dollars. According to figures from TNS Media Intelligence, spending on sleep-aid Ambien CR fell from $190 million in 2007 to $150 million in 2008 while outlays on Lunesta plunged to $107 million in

2008 from $271 the prior year. Rozerem alone cut spending by $100 million from $140 million in ‘07.

The cutbacks were less clear-cut for antidepressants. Spending on Cymbalta was pretty much flat at $179 million in 2008 but spending on Effexor fell by more than half

from $21.2 million in 2007 to $9.8 million last year, TNS figures show.

According to a 2008 study by Marketdata Enterprises, Tampa,

Fla., sleep is a $23.7 billion annual industry in the U.S. That includes medications, sleep labs/sleep centers, mattresses and pillows, continuous-positive-air-way-pressure machines and retail sleep aids. According to IMS Health, almost $19 billion of that comes from direct-to-consumer prescription sleep medications.

Dr. Robert Aronson, a sleep specialist at Cardinal Sleep Center in Joliet, Ill., said there is a correlation between the falling economy, a lack of sleep and the uptick in prescriptions and purchase of sleep aids—and he doesn’t see it ending soon. “The economic problems are likely to be pro-

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tracted,” he said. But, he added, continual use of sleep aids are “not good because sedative hypnotics are best used for short-term insomnias due to transient stressors.”

Sales of antidepressants in 2008 were up 2% compared with 2007. While prescriptions were up, dollar sales of prescription sleep aids were down 30% in ‘08 vs. ‘07 because the patent expired on Ambien (which was succeeded by Ambien CR). Sales were also hurt by the introduction of the cheaper generic Zolpidem, not to mention the emergence of more wallet-friendly over-the-counter sleep medications such as Unisom.

The total over-the-counter market for sleep aids reached $604 million in 2008, an increase of 9% over 2007 according to Packaged Facts, a division of Rockville, Md.-based Market Research Group.