On March 8, 2022, people walked through an Ulta Beauty store in Manhattan, New York, USA.
Carlo Allegri | Reuters
ultimate beauty The company’s shares fell about 13% on Wednesday as Chief Executive Dave Kimbell warned of cooling demand for beauty products.
Other stocks in the sector include Elf beauty, Estee Lauder and Cotyalso fell Wednesday morning.
“We’re seeing slower growth across the category,” Gimbell said during an investor conference hosted by JPMorgan Chase. “We entered the year – and we discussed this on the (earnings) call a few weeks ago – The category was expected to slow down. As I said, it has had several years of strong growth. We did not anticipate that this would continue to grow at the current rate.”
Ulta expects mid-single-digit sales growth this year, he said.
But Kimbell added that the slowdown was “earlier and deeper than we thought.” He said the trend has cut across price points and different beauty categories, but is even more significant in high-end cosmetics and hair care.
Beauty has become one of the hottest categories in retail. Even as U.S. consumers focus on spending on discretionary items such as clothing, they remain enthusiastic about cosmetics, skin care and other beauty products. The strength of the category has inspired many retailers to make bigger bets in beauty.
Target is opening more and more Ulta Beauty stores in its stores. Kohl’s plans to open Sephora stores in all of its locations. Macy’s is expanding its beauty chain Bluemercury.
However, beauty shoppers are not immune to economic pressures, even in a red-hot category, Kimbell said in a presentation Wednesday. He cited dynamics that could cause them to scale back spending, including rising credit card debt, geopolitical conflicts and the upcoming presidential election.
“It just creates a soup of activity for our consumers that they’re trying to navigate,” he said.
Ulta said on an earnings call last month that it expected net sales in fiscal 2024 to be between $11.7 billion and $11.8 billion. That would be higher than the $11.2 billion in sales it reported in its most recent fiscal year.
The retailer said it expects comparable sales, a measure that excludes the impact of store openings and closings, to grow 4% to 5% this fiscal year. This would be slower than growth of 5.7% in the previous fiscal year and 15.6% in fiscal 2022.
Ulta shares were trading at about $447 at noon Wednesday. Shares hit a 52-week high of $574.76 in mid-March, just before holiday quarter results. Ulta shares have fallen nearly 8% so far this year, lagging the S&P 500’s nearly 10% gain.
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