DAC Technologies: Better Results Expected for 2H

DAC Technologies (DAAT – $0.48) announced disappointing results for its second quarter, ending June 30, 2010. Sales for the three months period came in at $2,036,926 compared to $3,143,041 for the same period last year. And last year’s profit for the second quarter of $128,566 turned into a loss of $125,652.

Two main factors contributed to the Company’s loss. First, sales of guns and gun related items that boomed during the first six months of 2009, due to political concerns over possible gun controls that might be initiated by the current Presidential administration, returned to more normal levels.

Secondly, the Company’s biggest customer Wal-Mart initiated a new merchandising strategy in the course of 2008 and 2009 that involved vendor consolidation, item (SKU) reductions, use of nationally recognized brand names, and vendors working on lower gross margins. As DAC derives more than 50% of its sales from Wal-Mart, it had to comply.

So it lowered gross margins, licensed the Winchester brand name, opened a Bentonville, Arkansas office and a California distribution center. All of this is a heavy burden on the Company’s margins, resulting in a net loss for the first half of 2010.

David A. Collins, Chairman and CEO, stated: “We expect sales during the second half of 2010 to meet or exceed sales during the last half of 2009, returning the Company to profitability.”

We hope Mr. Collins is correct. For now, we’re going to put our recommendation for DAC Technologies on hold and see what the next quarter brings.

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