ultimate beauty The company topped Wall Street’s fiscal third-quarter forecasts on Thursday, dispelling concerns about increased competition and slowing demand for cosmetics and skin care products.
The retailer slightly raised its full-year forecast to reflect better-than-expected results. The company said it now expects net sales for the fiscal year to be between $11.1 billion and $11.2 billion, compared with previous guidance of $11.0 billion to $11.2 billion.
The company said it now expects full-year profit to range from $23.20 to $23.75, up from $22.60 to $23.50. Full-year comparable sales forecasts range from a 1% decline to flat. Comparable sales metrics track sales at Ulta stores that have been open for at least 14 months, as well as online sales.
Despite the raised outlook, the company expects comparable sales to decline in the low single digits during the holiday quarter.
Chief Executive Dave Kimbell said in a release that he was “proud of the progress” the company has made and “encouraged by early signs of what we’re doing to solidify our market position and drive improved performance.” The effort is gaining traction.
Here’s how the beauty retailer’s report for the three months ended Nov. 2 compared with Wall Street expectations, according to a survey of analysts by the London Stock Exchange (LSEG):
- Earnings per share: $5.14 vs expected $4.54
- income: $2.53 billion vs. $2.50 billion expected
Ulta shares rose more than 10% in after-hours trading.
Beauty has been a strong category for many retailers and has held up over the past few years despite inflation straining household budgets and many shoppers cutting back on discretionary purchases. The category’s resilience has led companies, including Target, Walmart, Kohl’s and macy’s department storeexpanding the product range of cosmetics and skin care products.
However, Ulta began hinting at potential trouble in April, with Kimbell warning of cooling beauty demand at an investor conference.
Ulta’s results in recent quarters have reflected discerning shoppers and fierce competition. The company missed profit expectations in August and lowered its full-year forecast due to lower same-store sales. That marked the first time in four years that the retailer missed Wall Street expectations.
The company’s stock price also fell. Ulta shares were down about 19% year to date as of Thursday’s close, lagging the S&P 500’s gain of about 28% over the same period.
The retailer reported fiscal third-quarter net income of $242.2 million, or $5.14 a share, compared with net income of $249.5 million, or $5.07 a share, a year earlier.
Revenue increased from $2.49 billion in the same period last year.
Comparable sales increased 0.6% year-over-year due to slight increases in passenger traffic and average ticket prices.
Customer transaction volume on its website and stores increased 0.5% year-over-year, and average tickets (the amount shoppers spent during their visit) increased 0.1% year-on-year.
Kimbell said on the company’s earnings call that the launch of new brands, digital tools and in-store events helped drive Ulta’s better performance in the quarter.
For example, he said, Ulta is selling an exclusive makeup line tied to the release of Universal’s “Wicked” movie. It has also added new online features, including virtual try-on enhancements and a new digital buying guide. It also hosts in-store events, including workshops where customers can receive guidance from Ulta stylists on how to create “salon-worthy hair.”
The holidays are a critical time of year for beauty retailers, including Ulta. Kimbell said the company was “encouraged by Cyber Monday’s performance.”
However, he hinted that the context remains challenging. He said the company was ready for the shopping season, although “our insights suggest that economic concerns are driving a greater focus on value.”
On the earnings call, Chief Financial Officer Paula Oyibo said the company continued to be “cautious about the consumer and operating environment” and factored that into its forecast. She said the five-day holiday break between Thanksgiving and Christmas could also hurt sales.
Revealed: Comcast is the parent company of NBCUniversal and CNBC. NBCUniversal is the distributor of “Wicked.”
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