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Earnings Results: Higher prices, ‘sustained resilience’ in demand are helping Ulta Beauty’s results

Shares of Ulta Beauty Inc. rose after hours Thursday after the beauty-product and salon chain reported third-quarter results that beat estimates and raised its full-year outlook, following price hikes and what management called “sustained resilience of the beauty category.”

The company reported net income of $274.6 million, or $5.34 a share, compared with $215.3 million, or $3.94 a share, in the same quarter last year.

Revenue rose to $2.3 billion, compared with $2 billion in the prior-year quarter. Management attributed the gains to “continued resilience of the beauty category, retail price increases, and the impact of new brands.”

Same-store sales, for stores open at least 14 months, rose 14.6%.

Analysts polled by FactSet expected Ulta

to earn $4.15 a share, on revenue of $2.22 billion. Those analysts expected same-store sales to rise 9.1%.

Ulta also raised its full-year sales and profit outlook. Executives said they expected sales of between $9.95 billion and $10 billion, and same-store sales growth of 12.6% to 13.2%, both up from prior forecasts. The company forecast earnings per share of between $22.60 and $22.90, compared with a prior outlook for between $20.70 and $21.20.

For the full year, FactSet forecasts earnings per share of $21.44, with revenue of $9.78 billion.

“Our third-quarter results reflect the sustained resilience of the beauty category and the strong emotional connection and loyalty we have cultivated with our guests,” Chief Executive Dave Kimbell said in a statement.

Shares rose 3% after hours.

Ulta Beauty reported as the retail world remains awash in discounts this year, as stores cut prices in an effort to sell clothing and appliances that consumers have turned away from amid a rise in grocery, gas and energy prices. The changes in spending, along with supply-chain hangups, have left retailers racing to clear inventories crowded with off-season goods or items customers don’t want.

While higher prices helped the third quarter, Ulta’s chief financial officer, Scott Settersten, said during a conference in September that he expected greater markdowns this holiday season than in prior years.

“During the holiday period, we compete not only with our beauty competitors, but with all of retail for gift giving dollars,” he said. “And so especially with the overhang here, we’re seeing it get across the retail category, I’d say we do expect the fourth quarter to be more promotional than it has been the last couple of years.”

However, Stifel analysts, in a note this week, said a survey conducted by the firm showed indications of “accelerating purchases of makeup,” which analysts said accounts for 43% of Ulta’s sales. They also said the company continued to take more of the “prestige” beauty market from department stores.

“We think greater makeup purchases are tied to reopening, including back-to-office work and generally reduced mask-wearing,” the analysts said.

A Raymond James survey also found that a majority of consumers planned to “at least maintain” their spending levels on beauty products in the year ahead. And it found customers were least likely to cut back on skincare and hair-product purchases.

Bath & Body Works Inc.
which also sells beauty products and personal-care items, last month hiked its full-year profit outlook. Chief Executive Sarah Nash said she was “pleased with our assortment — a great mix of returning holiday favorites and new giftable offerings.”

Ulta Beauty stock has climbed 15% so far this year. By comparison, the S&P 500 Index

has fallen 14% over that time.

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