Ulta Beauty on Thursday beat Wall Street’s fiscal third-quarter expectations, fending off fears of fiercer competition and slowing demand for makeup and skin care.
The retailer hiked its full-year outlook slightly to reflect the better-than-expected results. For the fiscal year, it said it now expects net sales to range from $11.1 billion to $11.2 billion, compared with its previous guidance for $11 billion to $11.2 billion.
It said it now expects full-year earnings per year to range from $23.20 to $23.75, up from $22.60 to $23.50. For the full year, the comparable sales forecast ranges from a decline of 1% to flat. The comparable sales metric tracks sales at Ulta stores open at least 14 months, along with online sales.
Despite the raised outlook, the company expects holiday-quarter comparable sales to decline by the low single digits.
In a news release, CEO Dave Kimbell said he’s “proud of the progress” the company’s made and “encouraged by early signs that our efforts to reinforce our market position and drive improved performance are gaining traction.”
Here’s what the beauty retailer reported for the three-month period ended Nov. 2 compared with what Wall Street was expecting, based on a survey of analysts by LSEG:
- Earnings per share: $5.14 vs. $4.54 expected
- Revenue: $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, holding up over the past couple of years even as inflation stretched families’ budgets and many shoppers pulled back on discretionary purchases. The category’s resilience caused companies including Target, Walmart, Kohl’s and Macy’s to expand their offerings of makeup and skin-care products.
Yet Ulta began to hint at potential troubles in April, with Kimbell warning of cooling beauty demand at an investor conference.
In recent quarters, Ulta’s results have reflected discerning shoppers and heightened competition. The company missed earnings results and cut its full-year outlook in August after a drop in same-store sales. It marked the first time that the retailer missed Wall Street’s expectations in about four years.
Shares of the company have fallen, too. As of Thursday’s close, Ulta’s stock is down about 19% so far this year, trailing the S&P 500’s approximately 28% gains during the same period.
For the fiscal third quarter, the retailer reported net income of $242.2 million, or $5.14 per share, compared with $249.5 million, or $5.07 per share, during the year-ago quarter.
Revenue rose from $2.49 billion in the year-ago period.
Comparable sales increased 0.6% year over year, as the retailer saw a tiny uptick in traffic and average ticket.
Customer transactions across its website and stores grew 0.5% year over year, and average ticket, the amount spent by shoppers during those visits, rose 0.1% year over year.
On the company’s earnings call, Kimbell said the launch of new brands, rollout of digital tools and in-store events helped drive Ulta’s better performance in the quarter.
For example, he said, Ulta is selling an exclusive line of makeup tied to the release of Universal‘s “Wicked” movie. It also added new features for online, including virtual try-on enhancements and new digital buying guides. And it had in-store events, including workshops where customers received coaching from Ulta’s stylists on how to get “salon-worthy blowouts.”
For beauty retailers, including Ulta, the holidays are a critical time of year. Kimbell said the company is “encouraged by our performance through Cyber Monday.”
However, he hinted of a still-challenging backdrop. He said the company is ready for the shopping season, even as “our insights suggest that economic concerns are driving a greater focus on value.”
On the earnings call, CFO Paula Oyibo said the company continues to take a “cautious view of the consumer and operating environment” and factored that into its forecast. She said the compressed holiday season, which has five fewer days between Thanksgiving and Christmas, could also hurt sales.
Disclosure: Comcast is the parent company of NBCUniversal and CNBC. NBCUniversal is the distributor of “Wicked.”
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