Ulta Beauty Exceeds Expectations with Strong Quarterly Earnings

by Warren Seah

Ulta Beauty has once again surpassed Wall Street expectations, demonstrating the resilience of the beauty category, according to Canaccord Genuity analyst Susan Anderson.

In the second quarter, Ulta reported earnings of $6.02 per share on revenue totaling $2.53 billion. This surpassed the anticipated earnings of $5.85 per share on revenue of $2.5 billion, as projected by analysts surveyed by FactSet.

“The beauty category has continued to deliver healthy growth, as consumers maintain their post-pandemic routines and expand their definition of beauty,” stated Chief Executive Dave Kimbell in the recent earnings release.

Additionally, Ulta has raised its outlook for the fiscal year. The company now predicts revenue between $11.1 billion and $11.2 billion, an increase from the previous guidance of $11 billion to $11.1 billion. Furthermore, earnings for the year are anticipated to range from $25.10 to $25.60 per share, surpassing prior estimates of $24.70 to $25.40 per share.

Canaccord analyst Susan Anderson, who rates Ulta stock as a Buy with a $606 price target, wrote, “With another quarter of strong top-line sales, we believe the beauty category continues to prove its resiliency.”

Anderson also emphasized that Ulta remains the go-to destination for all beauty needs. This is evidenced by the continuous growth of active loyalty customers and a significant increase in consumers who spend $500 or more annually at Ulta.

Furthermore, Ulta’s loyalty program has experienced a 9% increase in active members during the second quarter compared to the previous year.

Ulta Beauty’s consistent success in the market reaffirms its position as a leading player in the beauty industry. This achievement reflects the unwavering demand for beauty products and the brand’s ability to adapt to evolving consumer preferences. With a strong financial performance and a positive outlook for the future, Ulta is well-positioned for continued growth and success.

Ulta Faces Price Target Adjustment but Maintains Strong Buy Rating

Raymond James analyst Olivia Tong has revised her price target for Ulta, lowering it from $600 to $550. This adjustment reflects the compression of retail valuations in the market. However, Tong still maintains her Strong Buy rating on the stock. At present, Ulta trades at 16.2 times forward earnings, which is below its five-year average of 22.8 times.

According to Tong, Ulta’s success is attributed to its wide range of offerings across various price points and products. Additionally, the company’s invaluable insights from its 41.7 million loyalty members position it as a strong competitor in the market. As a result, Tong believes that Ulta is well-positioned to continue outperforming its peers.

Ulta provides both in-store and online options for shoppers to purchase premium and lower-priced cosmetic products. Despite concerns about weakening consumer spending due to inflation, beauty companies historically perform well during times of economic uncertainty. Shoppers tend to prioritize purchasing their favorite lipsticks and foundations even when facing financial constraints.

Stifel analyst Mark Astrachan shares this sentiment, referring to Ulta’s second quarter results as “solid.” Despite ongoing macroeconomic volatility and weakness in discretionary spending, Astrachan believes that the U.S. beauty market remains resilient. As a result, Astrachan rates the stock as a Hold with a $475 price target.

Despite a positive quarterly report, Ulta’s shares experienced a decline of 3.1% on Friday, reaching $409.53 after an initial rise in the premarket session. The stock, which was previously favored earlier in the year, has experienced a 12% drop in 2023.

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