Ulta off to ‘positive start,’ raises full-year outlook

Ulta Beauty reported a solid quarter even as beauty sales begin to moderate from the highs of the past two years.

“We entered 2023 anticipating that the unprecedented growth in the beauty category would moderate and that the promotional environment would increase,” Ulta CFO Scott Settersten said during the company’s earnings call. “These trends materialized in the first quarter and are reflected in our results.”

Also during the call, Ulta CEO Dave Kimbell addressed an issue that has been raised by other retailers such as Target and Dollar Tree during the current earnings season: shrink. He said that the retailer is seeing pressure from inventory shrink, partly due to organized retail crime. 

"While shrink is the result of various factors, theft, specifically organized retail crime, or ORC, is an increasingly concerning challenge, especially as we've seen a rise in violence and aggression during these incidents," Kimbell told analysts. 

Read More: https://chainstoreage.com/study-organized-retail-crime-orc-growing-scope-complexity

Kimbell said Ulta is committed to "ensuring a safe work environment," and is investing in fixtures, training, support structures, increased staffing and security. COO Kecia Steelman said locked fragrance cabinets will be in 70% of the chain this year, with fragrance being one of the targeted theft categories. 

Net income increased 4.7% to $347.1 million, or earnings per share of $6.88,  for the quarter ended April 29, compared to $331.4 million, or earnings per share of $6.30, in the year-ago period.  Analysts had expected earnings per share of $6.82 

Net sales increased 12.3% to $2.634 billion, just ahead of estimates. Ulta said the increase was driven by increased comparable sales, strong new store performance and growth in other revenue compared to the first quarter of fiscal 2022.

Comparable sales increased 9.3%, compared to a 18% increase in the year-ago quarter, driven by an 11.0% increase in transactions and a 1.5% decrease in average ticket.

“The year is off to a positive start as the Ulta Beauty team delivered revenue, operating margin, and diluted EPS consistent with our internal expectations,” said CEO Dave Kimbell. “Store traffic remained healthy, member growth showed continued strength, we delivered growth across key categories, and we strengthened engagement with the Ulta Beauty brand.

Ulta raised its full-year sales forecast to $11 billion to $11.1 billion from its previous estimate of $10.95 billion to $11.05 billion. It reaffirmed its same-store sales growth outlook at 4% to 5%

“While we expect the operating environment to continue evolving, we remain confident in the resilience of the beauty category and in our ability to drive share and profitable growth with our proven business model, a diverse, best-in-class assortment, an industry-leading loyalty program, and our world-class team,” said Kimbell.

At the end of the first quarter, Ulta operated 1,359 stores across 50 states.