A gorgeous third quarter for Ulta Beauty

Ulta Beauty's formula of one-stop shopping for prestige, mass and salon beauty products continued to produce impressive sales growth in the third quarter.

The beauty retailer reported a 12.8% increase in customer traffic for the third quarter ended Nov. 1 and average spending rose by 2.2%. E-commerce sales grew 56.3% to $46.2 million from $29.6 million in the third quarter of fiscal 2014, representing 190 basis points of the total company comparable sales increase of 12.8%. The companyalso raised its outlook for the third time this year: Comps are now expected to rise 11%, rather than the 8% the Ulta team forecast in May.

“Ulta Beauty’s excellent performance in the third quarter was highlighted by top line momentum driven by double digit traffic growth, leading to above-plan earnings growth,” said Mary Dillon, CEO. “Delivering against our six strategic imperatives continues to drive our business forward. We believe our efforts to build awareness of the Ulta Beauty brand are bringing more guests to discover our differentiated assortment and the benefits of our loyalty program, now boasting 17 million active members. As a result of our financial performance in the third quarter and our position of strength heading into the holiday season, we are raising our guidance and now expect our 2015 full year earnings growth rate to be in the low twenties.”

One reason for Ulta's success may be the retailer's personalized in-store experience, which cannot be duplicated by Amazon or other Internet retailers. Which is not to say the company is ignoring e-commerce. Indeed, Ulta is managing to win at both store and online traffic, a difficult feat in the current retail environment.

For the third quarter net sales at Ulta increased 22.1% to $910.7 million from $745.7 million in the third quarter of fiscal 2014.Income per diluted share increased 22.0% to $1.11 compared to $0.91 in the third quarter of fiscal 2014.The retailer's online business also posted strong results, rising 56.3% to make a solid contribution to overall comps growth.

During the third quarter, the company opened 45 new stores and ended the third quarter with 860 stores and square footage of 9,080,084, representing a 12% increase in square footage compared to the third quarter of fiscal 2014.

For the fourth quarter the company expects net sales in the range of $1,212 million to $1,233 million, compared to actual net sales of $1,047.6 million in the fourth quarter of fiscal 2014.