First off, S&W was likely overvalued by a bit.
Second, they announced that they would not meet their earnings projection.
Third, it's the end of the fiscal year for a lot of people. Tis the seaon for profit taking as well as putting funds and portfolios into idle mode for the holiday season.
Fourth, the stock market is driven by a bunch of compulsive gamblers that are trying to outsmart the system and outguess the guy sitting next to them. Beyond the earnings report, there is likely lots of speculation about what is driving the drop in sales. Increased raw materials speculation, flagging home sales decreasing consumer discretionary spending, decreasing home values resulting in less tax revenue and thus decreased ability for departments to hand S&W piles of cash, a continually weakening dollar being seen as hampering S&W's ability to make profits on their non-firearms branded 3rd party products, etc.
There is also the possibility that S&W is deliberately trying to not meet earnings expectations. It is possible that they could have met earnings forcasts, but CHOSE not to and offer purchasing incentives instead. By doing this, they can increase market share and brnad penetration, at the same time realize tax benefits for the quarter, and still earn interest on the $50 while processing rebates, all while lowering the stock price. This could be in preperation for a stock buyback or some other/additional moves that would allow them to secure more investment dollars for operating capital.
That's if they have been smart. it could also just be them taking a hit for the new shotguns and rifles not rolling out when planned exactly, thus incurring more overhead before they have a chance to earn any profit. Additionally, as product lines, they are likely to take longer to turn a profit than handguns.