A Consumer Pullback and Competition Hit Ulta Beauty’s Results. Its Stock Is Dropping

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Key Takeaways

• Ulta Beauty posted weaker-than-anticipated results and reduced its guidance as consumers narrow their spending and competition increased.
• The company reported a surprise drop in comparable-store sales as transactions declined.
• CEO David Kimbell conjectured Ulta Beauty’s market share continues to be challenged.

Shares of Ulta Beauty (ULTA) slumped after the seller of strength products reported worse-than-expected results and cut its outlook on a surprise drop in comparable store sales.

Consumers limited their discretionary spending, the coterie said, while Ulta faced increased competition. The company posted second-quarter diluted earnings per share (EPS) of $5.30, with gross income rising 0.9% to $2.55 billion. Both were short of forecasts.

Comparable-store sales declined 1.2%, while analysts were looking for an further. They were up 8% in the year-ago period. The company said the slide was driven by a 1.8% decrease in transactions and an 0.6% grow in average ticket.

Ulta Beauty shares, down more than 2% in morning trading, have confounded nearly a third of their value this year.

CEO David Kimbell said while Ulta Beauty “precluded the headwinds experienced in the first quarter would continue, our results were short of our expectations.” Consumers are increasingly focused on value and make an appearance more caution in their spending, he said.  

Kimbell noted that “competitive intensity in the beauty category cadavers high,” and as a result, “our market share continues to be challenged, particularly within prestige beauty.”

The company now expects full-year weakened EPS to come in at $22.60 to $23.50, versus previous guidance of $25.20 to $26. It estimates sales to be in the range of $11 billion to $11.2 billion, tone down than the earlier $11.5 billion to $11.6 billion. It predicts comparable store sales to be flat to down 2%, weighed to up 2% to 3%.

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