Why Conns Shares Plunged

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of electronics retailer Conns sank 10% today after its quarterly results and outlook disappointed Wall Street.

So what: The stock has soared over the past year on rebounding demand, but today's second-quarter EPS miss -- $0.52 versus the consensus of $0.60 -- coupled with lackluster guidance is forcing Mr. Market to scale back its expectations a bit. While revenue jumped 30% to $270.7 million, poor performance in its credit card business weighed heavily on the bottom line, triggering concern among analysts that sales are being boosted by somewhat lax lending.

Management maintained its 2013 guidance of $2.50 to $2.65 per share, below Wall Street's expectation of $2.66 per share. "We expect further improvement in overall delinquency rates over the next several months," said Chairman and CEO Theodore Wright. "Despite the challenges in our collections operations in the second quarter, we are reaffirming our guidance for the year." With the stock still up about 140% over the past year, however, I'd wait for those challenges to be baked further into the price before jumping in.

The retail space is in the midst of the biggest paradigm shift since mail order took off at the turn of last century. Only those most forward-looking and capable companies will survive, and they'll handsomely reward those investors who understand the landscape. You can read about the 3 Companies Ready to Rule Retail in The Motley Fool's special report. Uncovering these top picks is free today; just click here to read more.

The article Why Conns Shares Plunged originally appeared on Fool.com.

Fool contributor Brian Pacampara has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.