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SAN FRANCISCO, May 11 (Reuters) - Shares of Vista Outdoor Inc rose on Thursday after the company said high retail inventories of its guns and ammunition should normalize by mid-year following an "unprecedented" drop in demand after the election of Donald Trump as president.
Vista Outdoor gave a full-year outlook that was shy of analysts' average expectations, but some on Wall Street took the overall report as the latest hint that a slump in gun sales might be stabilizing.
Its stock rose 1.7 percent, while Smith & Wesson's owner, American Outdoor Brands Corp, gained 1.5 percent. Sturm Ruger & Company dipped 1.5 percent, but it remains up 10 percent from Monday, when it reported a lower-than-expected decline in March-quarter revenue.
The November election of Republican Trump, who opposes regulations on gun ownership, abruptly undercut demand for guns as people became less worried the government would curtail their ability to purchase firearms.
Vista Outdoor said in a press release it expects inventories at retailers caught out by the drop in demand to stabilize by the middle of its fiscal year, although it also said it expects weakness to continue beyond then. Vista Outdoor's fiscal year ends in March.
"A lot of investors are encouraged by that," said Wunderlich analyst Rommel Dionisio, who recommends buying Vista Outdoor.
Recent data on firearm background checks also hints at stabilization. After a sharp post-election drop, background checks in April were flat compared with April 2016, according to the National Shooting Sports Foundation.
Data on background checks is collected by the Federal Bureau of Investigation and the NSSF adjusts it to remove checks for conceal-carry permits so that it better reflects actual gun purchases.
In addition to guns and ammunition, Vista Outdoor sells archery gear, bicycle helmets, scopes and other sports products. It has been slammed by a wave of retail bankruptcies, including those of Sports Authority and Gander Mountain, which sold many of its products. Its stock remains down 55 percent in 2017.
Vista Outdoor reported March-quarter revenue down 5 percent at $579 million and adjusted earnings per share of 3 cents. A write-off of receivables from a bankrupt retail customer knocked 18 cents off Vista Outdoor's EPS.
It forecast full-year revenue of $2.36 billion to $2.42 billion. Analysts on average had estimated $2.42 billion. (Reporting by Noel Randewich; Editing by Dan Grebler)