The maker of Smith & Wesson firearms said it would split into two companies and reverse a multiyear diversification effort aimed at countering the sluggish domestic gun business.

American Outdoor Brands Corp. said Wednesday that it plans to separate into two companies in the second half of next year, with Chief Executive James Debney leading the smaller segment selling outdoor products such as hunting knives and camping equipment.

The company plans to give shareholders stock in two new entities: Smith & Wesson Brands Inc., which will retain gun sales, and American Outdoor Brands Inc.

The second-largest U.S. firearms maker by sales cited a raft of market changes for the decision. Some investors have pushed the industry for stepped-up efforts to combat gun violence, while companies continue to resist potential liabilities from the illegal use of their products.

“There have been significant changes in the political climate as well as the economic, investing, and insurance markets since we embarked upon what we believe have been our very successful diversification efforts,” Chairman Barry Monheit said in a statement.


The debate over gun rights and ownership in the U.S., exacerbated by multiple mass shootings, has created a boom-and-bust cycle in the industry. That has driven some firearms makers, distributors and retailers out of business, denting sales and profits at big companies such as American Outdoor Brands and market leader Sturm, Ruger & Co.

Shares in American Outdoor Brands Corp, which changed its name from Smith & Wesson Holding Corp. in 2016, have lost more than two-thirds of their value since the market peaked just after the presidential election of Donald Trump.

Gun buyers stocked up in anticipation of a Democratic victory that was expected to trigger tougher ownership regulations. Instead, the industry was left with an excess of inventory that has led to job cuts among firearm makers as weak demand and heavy discounting hit sales and profits.

American Outdoor’s sales fell to $638 million in its fiscal year through the end of April from more than $900 million three years earlier, even as it diversified by acquiring companies that make gun accessories and outdoor products such as hunting knives. These now account for about a quarter of sales.


Mr. Debney moved the company into a domestic outdoor pursuits market that analysts estimated to be worth more than $60 billion a year. The British-born executive in late 2014 established an accessories division with the purchase of Battenfeld Technologies Inc., with products that include targets and gun stocks.

Vista Outdoor Inc., the guns and ammunition specialist spun off from one of the nation’s largest defense companies, took a similar approach in recent years, buying the makers of CamelBak water bottles and Jimmy Styks paddle boards. However, the strategy failed to gel the diverse product mix, and Vista Outdoor earlier this year sold Caliber Co., which operates its Savage Arms and Stevens firearms brands, to Long Range Acquisition LLC for $170 million. The company kept its ammunition business.

—Stephen Nakrosis contributed to this article.

Write to Doug Cameron at doug.cameron@wsj.com