Ulta Beauty Shares Slide as 4th-Quarter Earnings Disappoint

The beauty retailer beat estimates but still recorded year-over-year earnings declines

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Margaret Moran
Mar 11, 2021
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After market close on March 11, Ulta Beauty Inc. (

ULTA, Financial) released its earnings results for the fourth quarter and full year of 2020.

Both earnings and revenue beat analyst consensus estimates. However, this did not provide enough optimism to make up for the year-over-year declines in both the top and bottom lines. Shares fell 9% to around $313.52 before bouncing back slightly in after-market trading following the news.

Earnings results

For the full year, revenue declined 16.8% to $6.2 billion compared to $7.4 billion in fiscal 2019. Adjusted earnings per share came in at $4.66 compared to $11.85 the year before, with comps down 17.9%.

In the fourth quarter, revenue was $2.19 billion, representing a 4.64% decline compared to the prior-year quarter. Meanwhile, adjusted earnings per share came in at $3.41, down 10.97% year over year. Analysts had been expecting revenue of $2.08 billion and adjusted earnings of $2.35 per share.

Comparable store sales were down 4.8%. The gross profit decreased 4.4% to $771.0 million, but the gross profit margin increased slightly to 35.1% compared to 35.0% in the fourth quarter of fiscal 2019 due to lower marketing expenses.

The company reported a number of significant impairment charges during the quarter totaling $30.4 million. These included $13.2 million from the suspension of the planned expansion to Canada, $10.0 million for employee severance costs, $5.6 million in lease termination costs due to the permanent closure of 19 stores and $1.5 million due to "the impairment of tangible long-lived assets and operating lease assets associated with certain retail stores." In addition to the 19 store closures, Ulta opened two new stores and relocated another two during the quarter.

As of the quarter's end, the company had cash and equivalents of $1.0 billion, a significant increase compared to $392 million at the end of fiscal 2019 as the company strengthened its liquidity with debt offerings during the Covid-19 pandemic.

During the fourth quarter, Ulta repurchased 147,824 shares of its common stock at a cost of $41.9 million, less than a fourth of what it repurchased in the prior-year quarter. For the full year, it repurchased 474,794 shares of its common stock at a cost of $114.9 million.

Looking forward

Going into 2021, the company expects strong recovery and is planning accordingly with 40 net new stores and approximately 21 remodel or relocation projects scheduled. Revenue is predicted to be between $7.2 billion and $7.3 billion, with earnings per share in the range of $8.85 to $9.30 and comps between 15% and 17%.

Additionally, the company plans to spend $850 million on share repurchases, incur capital expenditures between $200 million and $250 million and record depreciation and amortization expenses of $270 million to $280 million.

"We are encouraged by the momentum we are seeing in store traffic trends," CEO Mary Dillon said. "Although our visibility as to when demand will fully recover is limited, we are confident our business will continue to strengthen in fiscal 2021, as COVID-19 vaccines become more accessible."

Disclosure: Author owns no shares in any of the stocks mentioned. The mention of stocks in this article does not at any point constitute an investment recommendation. Investors should always conduct their own careful research and/or consult registered investment advisors before taking action in the stock market.

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