What happened

Shares of office furniture and hearth products company HNI (NYSE:HNI) were slammed on Tuesday. Shares fell as much as 26.3% in the morning but are down about 19.7% at 12:10 p.m. EDT.

The stock's decline follows the company's third-quarter earnings release. While HNI reported higher-than-expected revenue and non-GAAP EPS, management said it expected profitability to take a hit in its fourth quarter as it works through "two major challenges," including an increased investment in areas with lower near-term sales and operational transformation initiatives that have proved to be more difficult than expected.

A chalkboard sketch of a stock price falling

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So what

Management said these two major challenges will increase costs as a percentage of revenue. As a result, HNI significantly lowered its guidance for full-year non-GAAP earnings per share. It is now expecting non-GAAP EPS for the year to be between $1.88 and $1.95, down from a previous forecast of $2.35 to $2.55.

"Lower fourth quarter volume in the supplies-driven business, higher costs related to operational transformations, and unfavorable business and product mix are primarily driving the reduced outlook," the company said about its revised guidance.

Now what

Management is optimistic that it will work through these challenges successfully. "We are confident we will stabilize our transformations and return to driving cost improvements and continue to grow the top line," said HNI CEO Stan Askren.

Daniel Sparks 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.