Ulta Beauty Down Despite Shining Earnings Report

The beauty retailer beat expectations, increased guidance

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Aug 24, 2017
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Cosmetics retailer Ulta Beauty Inc. (ULTA, Financial) reported its second-quarter earnings after market close on Aug. 24.

The Bolingbrook, Illinois-based beauty retailer posted EPS of $1.83, topping expectations of $1.78. Quarterly revenue of $1.29 billion was slightly higher than the estimates of $1.28 billion and grew 20.6% from the prior-year quarter.

Despite the beat, Ulta shares initially fell nearly 8% to $214 in after-hours trading before recovering.

The graph below illustrates the company’s revenue growth over the past decade.

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The company’s net sales increased 20.6% from the second quarter of 2016. Comparable store sales increased 11.7%, compared to a 14.4% increase last year, due to growth in transactions and average tickets.

CEO Mary Dillon said the company delivered “strong top-line growth” and “robust margin expansion” during the quarter.

“Product category strength was broad-based, with prestige cosmetics still driving the majority of our growth, and with skincare, fragrance and haircare all gaining momentum,” Dillon said. “We are also benefitting from continued success of our marketing programs, rapid growth in e-commerce and solid operational execution across the enterprise.”

Ulta raised its EPS guidance for the full year. It now expects earnings to grow in the high-20% range, up from the previous guidance of mid-20% growth. It also expects comparable sales to grow 10% to 11%, raising the lower end of the range from 9%.

As part of its plan to double the number of stores, the company opened 20 new locations during the quarter. It plans to open approximately 100 new locations in 2017.

With 2.32% of outstanding shares, Steve Mandel (Trades, Portfolio) is the company’s largest shareholder among the gurus. Spiros Segalas (Trades, Portfolio), Jim Simons (Trades, Portfolio), Columbia Wanger (Trades, Portfolio), Pioneer Investments (Trades, Portfolio), Lee Ainslie (Trades, Portfolio), Steven Cohen (Trades, Portfolio) and Mario Gabelli (Trades, Portfolio) are also shareholders.

Disclosure: I do not own any stocks mentioned.