Ulta Beauty Q2 online sales soar; expects at least 30 new stores next year

Ulta Beauty reported better-than-expected earnings amid strong online sales.

The beauty products giant earned $8.1 million, or 14 cents a share, in the second quarter ended Aug.1, compared with $161 million, or $2.76 a share, in the year-ago period. Adjusted earnings per share came in at $0.73, blowing past analysts' expectations of $0.06 per share. 

Sales fell 26% to $1.23 billion from $1.7 billion a year ago. Analysts had expected sales of $1.25 billion.

Total comparable sales fell 26.7%. Transactions declined 36.2% and the average ticket increased 14.9%. E-commerce sales increased more than 200%. 

"While the pandemic continues to impact our business, we are encouraged by improving trends," stated CEO Mary Dillon. “Comparable sales trends improved significantly throughout the quarter, from decreasing 37% in early May, as we began reopening stores, to decreasing 10% in July, when most of our stores were re-opened. Notably, sales trends have continued to improve, with comparable sales down in the mid-single digit range for the first three weeks of August."

Ulta expects to open 30 stores and relocate five this year. The company said that while it is still finalizing its real estate plans for next year, it expects to open at least 30 new stores. 

“The role of physical retail and beauty remains crucial to the shopping experience,” Dillon said on the company’s earnings call. “So while we know the role of e-commerce will continue to grow, we also continue to believe we can ultimately operate between 1,500 to 1,700 stores in the U.S. As we plan growth beyond this year, we will seek to balance the opportunity for lower rents with the opportunity to upgrade existing locations.”

Ulta had incremental costs related to COVID-19 of approximately $135 million during the first six months of fiscal 2020, and expects related costs between $35 million and $40 million in the second half of the year. It anticipates capital expenditures between $180 million and $200 million, compared to a previous expectation of between $200 million and $210 million.

The company ended the quarter with 1,264 stores.