Ulta Beauty’s Q2 Earnings Report

Ulta Beauty (NASDAQ:ULTA) reported second-quarter earnings that fell short of analyst expectations and cut its full-year outlook, causing shares to drop over 6% in premarket trading on Friday.

Key Financials

• Adjusted EPS: $5.30 (consensus: $5.51)
• Revenue: $2.55 billion (up 0.9% YoY; forecast: $2.62 billion)
• Comparable Sales: Decreased by 1.2% (compared to an 8.0% increase in the same quarter last year)

Revised Guidance

Ulta has significantly lowered its fiscal 2024 guidance, now expecting EPS of $22.60-$23.50, well below the previous consensus of $25.26. The company also reduced its full-year revenue forecast to $11-11.2 billion, down from the expected $11.495 billion.

Management Commentary

CEO Dave Kimbell acknowledged the disappointing results, stating, “While we are encouraged by many positive indicators across our business, our second quarter performance did not meet our expectations, driven primarily by a decline in comparable store sales.”

Margins and Profits

The company’s gross profit margin contracted to 38.3% from 39.3% a year ago, primarily due to lower merchandise margins and deleverage of store fixed costs. Operating income fell to $329.2 million, or 12.9% of net sales, down from $391.6 million or 15.5% from the prior year.

Share Repurchase and Expansion

Despite challenges, Ulta continued its share repurchase program, buying back 549,852 shares at a cost of $212.3 million during the quarter. The company also expanded its store network, operating 1,411 stores at the quarter’s end, with a net increase of 49 stores from the previous year.

Analyst Reactions

Following the report, Stifel analysts lowered their ULTA estimates and price target from $475 to $385, citing a demanding market share outlook. They noted that the company’s comp trends weakened and promotions increased, indicating substantial challenges ahead.

BMO Capital Markets considers ULTA a compelling business in an attractive sector but prefers to remain cautious until competition and sales margins stabilize.

Senad Karaahmetovic contributed to this report.