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Sheila Dang
Sheila Dang
Articles (264) 

Ulta's Performance Continues to Improve as Executives Buy Back Shares

September 19, 2014 | About:

Ulta Salon’s (NASDAQ:ULTA) CEO Mary Dillon and Director Dennis Eck bought 20,000 shares of the company on Sept. 17, totaling $2,390,480, according to GuruFocus Insider Data.

The chain of 715 stores provides salon services and a wide range of makeup, hair, and other beauty products. Its main competitors are Macy’s (NYSE:M), Regis Corp. (NYSE:RGS) and Sephora, a subsidiary of LVMH (LVMH), a luxury goods conglomerate not traded on the U.S. market. Sephora competes most directly with Ulta in the beauty products segment, but what sets Ulta apart is its offering of drugstore brand names, opening its customer base to a wider range of incomes.

GuruFocus ranks Ulta’s financial strength 10/10, and its profitability as 8/10. And indeed, Ulta’s gross profit has grown every year for the past eight years. Gross profit rose 17% in January year over year.

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Ulta’s stock price jumped dramatically from $97.48 on Sept. 11 to $114.89 the next day, and closed at $118.40 on Sept. 18.

The company plans to introduce new products and make changes to its reward program, which includes getting loyalty customers on one program to increase order size and frequency. Online sales have grown 54.9% year over year. Dillon, formerly the global chief marketing officer for McDonald’s (NYSE:MCD), may be seen by investors as the person with the expertise to drive sales and outreach at Ulta.

However, Ulta’s history of insider buys and sells shows a high volume of sales, even when share prices were relatively low. Dillon and Eck can only be betting the price will to continue to rise.

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Investors should note that Ulta’s assets are growing at 21.7% per year, compared to its revenue growth of 19.3% over the past five years. This may be a sign that Ulta is underperforming and unable to turn over its assets. Ulta’s P/S ratio is 2.36, a high number relative to the industry median of 0.4. 

View more insider CEO buys/sells and CFO buys/sells to gauge a firm's strategy. 

About the author:

Sheila Dang
Editorial assistant at GuruFocus

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