Ulta Beauty (ULTA, Financial) reported a slowdown in sales growth, particularly in its core U.S. cosmetics business, which management attributed to a decline in the overall U.S. cosmetics category. While the U.S. cosmetics industry is not likely to shrink in perpetuity, we think Ulta’s expense structure is ill-suited to handle slower growth and expect returns will suffer as the business is reset to slower growth.
From David Rolfe (Trades, Portfolio)'s Wedgewood Funds fourth-quarter 2019 shareholder letter.
