Concord Camera (NASDAQ:LENS) did make a pretty picture a few years back when disposable cameras were all the rage. But lately, it hasn't been all holiday snaps for the former Daily Double, shares of which have plummeted in recent months.

Concord stock fell sharply in morning trading on news that its fiscal Q2 sales (ended Dec. 27) are expected to be roughly $64 million, down from previous guidance of between $70 and $75 million. The company also now projects a new loss of between $2 and $2.5 million, well off previous guidance of a net profit of at least $5.2 million. (The reduced outlook would disappoint even without the $900,000 investment loss and $2.5 million charge.)

Lower-than-expected digital camera sales and falling price tags hurt revenues and profits. Though, revenues and sales were still up significantly over last year. Higher manufacturing costs related to certain new products also didn't help the company's bottom line.

Investors should watch the gross profit line carefully at Concord. In Q1, gross margins fell to below 18% from more than 25% the year before. A change in the way the company handles labor and overhead costs lowered gross profits, but was offset somewhat by lower product development costs and manufacturing improvements.

That changes in the product mix have at least temporarily reversed those improvements can't thrill investors. Much of Concord's sales growth continues to be driven by traditional and disposable products. While Kodak (NYSE:EK) may look to move away from such business, it'll be around for a while. Concord's product development dollars, meanwhile, are going digital.

Wherever the revenue comes from, Concord still targets the market's low end. To return to investor favor, Concord will have to improve manufacturing and operational excellence. Recent improvements in its operating costs and a debt-free balance sheet are encouraging, but just the beginning.

Talk about the future of Concord on our Concord Camera discussion board.

Dave Marino-Nachison can be reached at dmarnach@fool.com.