When people are becoming fashionable and trendy, no matter what the economic mood is they spend more on fashion products such as apparels and lifestyle products. This was affirmed by the better than expected quarter posted recently by some prominent players like the apparel retailer Ralph Lauren (RL, Financial) and watch maker Movado (MOV, Financial). This begets huge spending on beauty products, cosmetics and hair products being the most common, by the people. This trend has given way to another outperformer in the Street for the quarter. The beauty products retailer, Ulta Salon, Cosmetics and Fragrance (ULTA, Financial), posted exciting results beating Mr. Market’s expectations. Let’s take a look at the quarter.
An impressive performance
Higher consumer traffic drove revenue north by 22.8% to $474 million compared to same quarter last year. The company managed to attract customers with its focused initiatives of new marketing strategies, launch of new brands and providing better services. It also enhanced focus on its website Ulta.com. These initiatives worked for Ulta in an increased way since the effect of strong sales had a multiplying effect on the earnings of the company. The earnings per share shot up 46%, reaching 54 cents per share for the quarter. Comparable store sales grew by 10.1% for the quarter, which is quite incredible.
Solid expansion moves
A key driver for the increase in revenue was sales from new store openings of the Illinois based company. It opened a total of 18 new stores during the quarter and has plans to open another 82 in the coming quarters this year. Moreover, the beauty retailer plans to include a total of 1,200 stores in the long term. The only point to note here is that these store expansion is all U.S. centric, as the company hasn’t looked outside the States yet. But this looks like a good strategy of making its domestic presence pretty strong and sound before moving out.
It also longs to focus on its high end products such as the LancĂ´me boutiques range which will enhance its gross margin further. Talking about gross margins, investors got another piece of good news. The company expanded its gross margins to 36% from 34.9% in the year ago quarter, highlighting the fact that the company is already in the path of margin expansion by controlling its expenses.
Conclusion
Ulta definitely looks super strong with strong sales and great demand for its products. Even the expansion strategies of the company are made with proper care and analysis of viability thereby giving them even greater sales with each additional store. But there is more to it. Ulta has given a bright outlook for the second quarter with the income between $0.49 and $0.51 per share and this is given even after considering additional costs related to expansion of its prestige brands and the introduction of its new distribution center in Chambersburg. To me Ulta looks attractive from all sides.
