Why Signet Jewelers Stock Pulled Back Today

One day after soaring on a better-than-expected earnings report, Signet Jewelers (NYSE: SIG) was pulling back on a sign that investors think yesterday's rally was overheated, and investors took profits.

It's not unusual to see such a snapback after a sudden one-day gain. As of 11:33 a.m. ET, Signet stock was down 5.7%.

The day-after sell-off

Signet's decline today came as Wall Street analysts weighed in with updates after the report. At least five analysts raised their price targets on the stock, commenting on the company's better-than-expected earnings report and its raised guidance.

Signet, which is the world's largest diamond jewelry retailer, reported same-store sales growth of 2.2% even as revenue was down 0.5%, reflecting store closures.

However, that move helped drive profits higher, as adjusted operating income rose from $85.4 million to $107.2 million, and adjusted earnings per share jumped from $1.61 to $2.19, well ahead of expectations at $1.74.

Investors also seemed to like the company's announcement of a $125 million accelerated share repurchase program and that it raised its full-year guidance.

It now sees same-store sales growth of flat to up 2.5%, compared to previous guidance of down 0.75% to up 2.5%. It also called for adjusted EPS of $10.45-$12.15, up from an earlier forecast of $9.20-$11.00.

Is today's sell-off meaningful?

Signet stock gained 24% yesterday, but that kind of jump is understandable, given that the company is now on track for a record adjusted annual profit. Despite its modest growth, Signet's strategy of rationalizing its store base and finding ways to expand margins seems to be paying off.

Taken in the context of yesterday's gains, the stock is still up roughly 20% in the last two days.

Jeremy Bowman 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.