Ulta Q4 tops estimates, but offers weak outlook; new CEO details updated strategy
Ulta Beauty is the latest retailer to offer disappointing guidance for 2025 as it navigates consumer uncertainty and an extremely competitive beauty environment.
“The beauty landscape has fundamentally changed,” said Kecia Steelman, who took the reins as CEO from Dave Kimbell in January, on the company's earnings call. “Guest expectations continue to rise, and the pace of change is accelerating. The competitive environment in beauty has never been more intense.”
Steelman, who previously served as COO of Ulta, said that, for the first time, the retailer lost market share in beauty in 2025.
Along with external factors, Ulta is also navigating a series of company-specific challenges. On the call, Steelman told analysts that Ulta’s current in-store presentation and guest experience “are not as strong as we would like,” and that these are opportunities “well within our control.”
Steelman also said that Ulta’s new fulfillment options such as buy-online and pick-up in-store, ship from store and same-day delivery have results in execution challenges, “particularly in product transitions and launches, as we leverage new tools and processes.”
Ulta will spend 2025 investing in efforts to improve its business.
“Fiscal 2025 will be a pivotal year as we make purposeful investments to fuel our future growth and move quickly to optimize our business,” Steelman stated in the earnings release. “While it will take time to see the impact of these efforts, we are confident these investments will help reignite our momentum and unlock sustained growth and long-term value for our shareholders."
On the call, Steelman outlined a plan called “Ulta Beauty unleashed.” The goals include improving in-store presentation, inventory levels and product assortment, particularly in wellness categories such as nutrition and sleep.
“We are focusing to ensure the guest is at the center of everything we do, and we intend to move faster, invest strategically and optimize our business to achieve our long term goals, to drive profitable growth and market share,” she told analysts.
Ulta also plans to launch a third-party digital marketplace in the fall. The marketplace will enable the retailer to expand its online offerings with a broader range of beauty and wellness products. Customers will be able to earn loyalty points on marketplace purchases and make returns at Ulta’s stores.
Fourth Quarter
The company’s net income totaled $393 million, or $8.46 per share, for the quarter ended Feb.3, compared with $394 million, or $8.08 per share, in the year-ago period. Analysts’ had expected earnings of $7.12 per share.
Sales dropped 1.9% to $3.49 billion, topping analysts’ estimates of $3.46 billion. (Similar to other retailers, Ulta benefited from an extra selling week in the year-ago period.)
Comparable sales rose 1.5%. Transactions during the quarter fell by 1.4%, but the average transaction was up 3%.
For the full year, net sales increased 0.8% to $11.3 billion, primarily due to new store contribution, partially offset by the benefit of the 53rd week of sales in fiscal 2023. Comparable sales increased 0.7% compared to an increase of 5.7%, driven by a 1.1% increase in average ticket and a 0.4% decrease in transactions.
For its current fiscal year, Ulta expects comparable sales to be flat or up to 1%, with earnings per share of $22.50 to $22.90. The metrics are below Street estimates.
“The operating environment continues to be dynamic, and as we navigate ongoing consumer uncertainty, we believe it is prudent to take a cautious approach to our guidance for fiscal 2025,” Ulta CFO Paula Oyibo said during the earnings call.
During fiscal 2024, Ulta opened 66 new stores, relocated two stores, remodeled 41 stores, and closed six stores, for a total of 1,445 stores.
