Ulta Beauty on Thursday beat Wall Street's expectations for the fiscal third quarter, fending off fears of tougher competition and slowing demand for makeup and skin care.
The retailer slightly raised its full-year outlook to reflect better-than-expected results. For the fiscal year, the company now expects net sales of $11.1 billion to $11.2 billion, compared to its previous forecast of $11 billion to $11.2 billion.
The company now expects full-year earnings of $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 a standstill. The comparable sales metric tracks sales at Ulta stores open at least 14 months as well as online sales.
Despite the increased guidance, the company expects comparable sales to fall in the low single digits in the holiday quarter.
In a press release, CEO Dave Kimbell said he was “proud of the progress” the company has made and “encouraged by early signs that our efforts to strengthen our market position and drive improved performance are gaining momentum.”
Here's what the cosmetics retailer reported for the three-month period ended Nov. 2 compared to Wall Street's expectations, based on an analyst survey by LSEG:
- Earnings per share: $5.14 versus expected $4.54
- Revenue: $2.53 billion versus expected $2.50 billion
Ulta shares rose more than 10% in after-hours trading.
Beauty has been a strong category for many retailers, holding up in recent years even as inflation stretched families' budgets and many shoppers pulled back on discretionary purchases. The resilience of the category has led companies to, among other things, Goal, Walmart, Kohl's And Macy's to expand their range of makeup and skin care products.
Still, Ulta began hinting at potential problems in April, when Kimbell warned of slowing demand for beauty products at an investor conference.
In recent quarters, Ulta's results reflected sophisticated shoppers and increased competition. The company missed earnings results and lowered its full-year outlook in August after same-store sales fell. It was the first time in about four years that the retailer missed Wall Street's expectations.
The company's shares have also fallen. As of Thursday's close, Ulta shares are down about 19% so far this year, lagging the S&P 500's roughly 28% gains over 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, in the year-ago quarter.
Sales rose from $2.49 billion in the same period last year.
Comparable sales rose 0.6% year-over-year as the retailer reported modest increases in traffic and average ticket counts.
Customer transactions on the website and in-store increased 0.5% year-over-year, and average ticket amount, the amount shoppers spend on those visits, increased 0.1% year-over-year.
On the company's earnings call, Kimbell said new brand launches, digital tool rollouts and in-store events contributed to Ulta's improved performance in the quarter.
For example, he said Ulta was selling an exclusive makeup line in conjunction with the release of the Universal film “Wicked.” New online features have also been added, including virtual try-on improvements and new digital buying guides. And there were in-store events, including workshops where customers were trained by Ulta stylists on how to achieve “stylist-friendly blowouts.”
For beauty retailers, including Ulta, the holidays are a critical time of year. Kimbell said the company was “encouraged by our performance on Cyber Monday.”
However, he indicated that there would continue to be difficult conditions. He said the company is ready for the buying season, although “our insights suggest that economic concerns are leading to a greater focus on value.”
On the earnings call, CFO Paula Oyibo said the company continued to have a “cautious view of the consumer and operating environment” and had taken this into account in its guidance. 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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