Ulta Beauty has rare miss amid increased competition, market shifts
Ulta Beauty reported disappointing second-quarter earnings and revenue, driven by a decline in comparable store sales, and trimmed its full-year guidance.
“We are clear about the factors that adversely impacted our store performance, and we have actions underway to address the trends,” said CEO Dave Kimbell. “We are focused on driving stronger sales and traffic and continuing to exercise financial discipline.”
It was the beauty giant’s first earnings per share miss since May 2020 and first revenue miss since December 2020, according to CNBC.
On the company’s earnings call, Kimbell noted that there are “significantly more places to buy beauty, especially prestige beauty, with more than 1,000 new points of distribution opened in the last three years.”
“As a result, our market share continues to be challenged, particularly within prestige beauty," Kimbell told analysts.
The company was also challenged by consumers who have become more cautious with their spending, Kimbell said.
Ulta earned $252.6 million, or $5.30 a share, in the quarter ended Aug. 3, compared with $300.1 million, or $6.02 a share, in the year-ago quarter. Analysts polled by FactSet expected earnings of $5.47 a share.
Net sales rose 0.9% to $2.55 billion, and just below estimates, primarily due to new store contribution and growth in other revenue. Comparable-store sales fell 1.2% amid 1.8% decline in transactions and a 0.6% increase in average ticket.
Merchandise inventories, net at the end of the second quarter of fiscal 2024 increased 10.1% to $2.0 billion compared to $1.8 billion at the end of the second quarter of fiscal 2023. The increase was primarily due to inventory to support new brand launches, the opening of the new market fulfillment center in Greer, S.C., and the addition of 49 net new stores since July 29, 2023.
In light of the chain’s first half trends and a more cautious outlook, the company said it updated its full-year expectations.
“I remain confident in the power of our differentiated model, the strength of our financial foundation, and our ability to deliver value for our shareholders over the long term,” Kimbell said.
Ulta now expects revenue of $11 billion to $11.2 billion, down from its previous guidance of $11.5 billion to $11.6 billion. Comparable sales are expected to be in a range of flat or down 2% compared to its previous forecast of a 2% to 3%. Earnings per share are expected to range from $22.60 to $23.50, down from $25.20 to $26.
At the end of the second quarter of fiscal 2024, Ulta operated 1,411 stores.
