Why Shares of Signet Jewelers Plunged 26% Tuesday

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What happened?

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Shares of Signet Jewelers (NYSE: SIG), the largest midmarket jewelry chain in the U.S., plunged more than 26% as of 11:20 a.m. EST after the company fell short of Wall Street profit estimates and management lowered guidance, which sent investors running for the hills.

So what

Signet Jewelers' same-store sales declined 5% in part due to weather-related impacts, which drove the results down roughly 120 basis points. Total sales were down 2.5%, compared to the prior year, to $1.16 billion during the third quarter. There was pain on the bottom line, too, as the company's operating margin declined 220 basis points and its loss per share checked in at $0.20.

"Signet had a challenging third quarter. In addition to an anticipated sequential slowdown in our same store sales, unfavorable weather-related incidents, along with unexpected disruptions during the transition of our credit services, further negatively impacted results. Encouragingly, within this backdrop, we advanced our strategic priorities, which are beginning to deliver results." said Virginia C. Drosos, chief executive officer of Signet Jewelers, in a press release.

Now what

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But the real kicker that sent investors heading to the door was the company's reduced guidance. Management now expects full-year earnings per share (EPS) to check in between $6.10 and $6.50 compared to prior guidance of $7.16 to $7.56 per share. The company hopes to turn things around in the near term by focusing on its customers with streamlined promotions and strategies, growing its eCommerce sales revenue, and reducing costs and inventory. Today's sell-off suggests investors remain skeptical that those strategies will be achieved anytime soon, but also keep in mind that Signet has a history of volatility following earnings announcements.

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Daniel Miller has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.