What: Shares of Essendant Inc. (NASDAQ:ESND) dropped 36.6% Thursday after the workplace products distributor announced weaker-than-expected second-quarter 2016 results.

So what: Quarterly revenue climbed 0.9% year over year, to $1.35 billion, while adjusted net income fell 34.2%, to $20.3 million. Adjusted earnings per diluted share declined 32% year over year, to $0.55. Analysts, on average, were looking for adjusted earnings of $0.84 per share on revenue of $1.36 billion. 

Image source: Essendant Inc.

During the subsequent conference call, Essendant CEO Bob Aiken blamed "significant headwinds to gross margin in our office products and JanSan businesses." Aiken elaborated those headwinds were primarily the result of "general market pressures, a shift in mix to larger and lower-margin customers, and a shift in mix to lower-margin categories such as paper and ink and toner."

Now what: Consequently, Essendant also reduced its guidance for the full year, calling for revenue to increase 1% to 2% (compared to 1% to 5% previously) to a range of $5.4 billion to $5.475 billion, which should result in adjusted earnings per share in the range of $2.15 to $2.30 (compared to $3.20 to $3.40 previously). 

To be fair, Aiken promised the company would accelerate its previously outlined business strategies while working to improve margins and reduce costs. But in the meantime, given its underwhelming performance and enormous guidance reduction, it's no surprise to see investors so aggressively bidding shares of Essendant down today.

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