Ultimate beauty On Thursday, it beat Wall Street expectations for the third quarter of the fiscal year, fending off fears of fiercer competition and weakening demand for makeup and skin care.
The retailer slightly raised its full-year guidance to reflect better-than-expected results. For the fiscal year, the company now expects net sales to range from $11.1 billion to $11.2 billion, up from its previous guidance of $11 billion to $11.2 billion.
The company now expects annual earnings to range from $23.20 to $23.75 per year, up from $22.60 to $23.50. For the full year, comparable sales expectations range from down 1% to flat. The comparable sales metric tracks sales at Ulta stores open at least 14 months, along with online sales.
Despite the positive outlook, the company expects comparable sales to decline by low single digits during the holiday quarter.
In a press release, CEO Dave Kimbell said he is “proud of the progress” the company has made and “encouraged by the early signals that our efforts to strengthen our market position and drive better performance are gaining traction.”
Here's what the beauty retailer reported for the three-month period ending Nov. 2, compared to what Wall Street expected, based on a survey of analysts by LSEG:
- Earnings per share: $5.14 vs. $4.54 expected
- Gain: $2.53 billion versus $2.50 billion expected
Ulta shares rose more than 10% in after-hours trading.
Beauty has been a strong category for many retailers, holding firm in recent years even as inflation squeezed household budgets and many consumers pulled back on purchases. The resilience of the category caused, among other things, companies Goal, Walmart, Kohl's And Macy'sto expand their makeup and skin care offerings.
Still, Ulta began hinting at potential problems in April, when Kimbell warned at an investor conference about declining demand for beauty products.
In recent quarters, Ulta's results have reflected discerning shoppers and increased competition. The company missed earnings results and cut its full-year guidance in August after a decline in same-store sales. It was the first time in about four years that the retailer failed to meet Wall Street expectations.
The company's shares have also fallen. As of Thursday's close, Ulta shares are down about 19% so far this year, trailing the S&P 500's gain of about 28% over the same period.
For the fiscal third quarter, the retailer reported net income of $242.2 million, or $5.14 per share, compared to $249.5 million, or $5.07 per share, during the year-ago quarter.
Revenue increased from $2.49 billion in the same period a year ago.
Comparable sales increased 0.6% year-over-year as the retailer saw a small increase in traffic and average ticket counts.
The number of customer transactions on the website and in stores grew 0.5% year-over-year and the average ticket, the amount shoppers spend during those visits, increased 0.1% year-over-year.
During the company's earnings call, Kimbell said the launch of new brands, the rollout of digital tools and in-store events fueled Ulta's improved 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 improvements to virtual trying on and new digital buying guides. And there were in-store events, including workshops where customers received coaching from Ulta's stylists on how to achieve “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 during Cyber Monday.”
Yet he hinted at a still challenging background. He said the company is ready for the shopping season, even as our insights suggest economic concerns are driving a greater focus on value.
During the earnings call, CFO Paula Oyibo said the company continues to take a “cautious view of the consumer and business environment” and has 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.”
