Shares in Ulta Beauty rose in after-hours trading on Thursday after the company said its third-quarter sales rose as shoppers once again showed they’re willing to spend on fragrances, skincare and more even when budgets are tight.
The beauty retailer raised the lower end of its range for full-year sales and profit expectations. It said it expects net sales for the fiscal year to be in the range of $11.10 billion to $11.15 billion and comparable sales to be in the range of 5.0% to 5.5%. It said adjusted earnings per share for the year would be in the range of $25.20 to $25.60.
On an earnings call with investors, CEO Dave Kimbell said the retailer saw healthy traffic in its stores and on its website. He said the company expects a more promotional holiday season in the beauty category this year, but the season is “off to a good start” and stores are stocked with “both value-first and splurge-worthy items”.
“Our insights suggest that consumers are ready to celebrate, even as they navigate an uncertain economic environment,” he said.
Here’s what Ulta reported for the three-month period ended 28 October, compared with what Wall Street was expecting, based on a survey of analysts by LSEG, formerly known as Refinitiv:
- Earnings per share: $5.07 vs. $4.95 expected
- Revenue: $2.49 billion vs. $2.47 billion expected
The company’s shares were up as much as 10% in extended trading.
Ulta also announced a change in leadership on Thursday. Chief Financial Officer Scott Settersten will retire in April after nearly two decades with the beauty retailer. He will be replaced by Paula Oyibo, Ulta’s senior vice president of finance, the company said.
Third quarter net income increased to 249.5 million dollars, or 5.07 dollars per share, from 274.6 million dollars, or 5.34 dollars per share, in the year-ago period. Sales increased from $2.34 billion in the same period last year.
Comparable sales, a metric that tracks Ulta stores open at least 14 months along with online sales, increased 4.5% year over year.
During the quarter, customers made more trips to Ulta’s stores and website, but spent slightly less. Transactions increased by nearly 6% and the average ticket decreased by 1.4% compared to the same period last year.
Beauty has been one of the hottest categories for retailers over the past year. Even as consumers have pulled back on other types of discretionary purchases, they have continued to spend on make-up, face masks, fragrances and more.
That’s inspired retailers including Macy’s, Target and Kohl’s to commit to the category by adding new brands, products and space. Target, for example, has a growing number of Ulta shops in its stores.
In Ulta’s third quarter, nearly every category showed growth. Skin care was Ulta’s fastest-growing segment during the period, posting double-digit year-over-year growth, Kimbell said on an earnings call with investors Thursday. The fragrance and bath category grew in the low double digits.
Sales in the makeup category were flat as mid-single-digit growth in mass makeup brands offset a decline in prestige makeup, he said. Hair sales declined at a low single-digit rate as consumers purchased fewer hair tools.
Kimbell noted the resilience of the beauty category in almost any economic environment. On the earnings call, he pointed to data from Euromonitor showing that the US beauty category has grown in the low- to mid-single digits every year for more than a decade, with the exception of the Great Recession and in 2020 during the Covid pandemic.
“While we expect growth to continue to normalise to historical ranges, we remain confident that the category will continue to grow, barring a macroeconomic event,” he said.
He said customers are not only coming to Ulta’s stores and website looking for new brands and products, but also seeing beauty as part of their wellness routine.
As of Thursday’s close, Ulta shares were down about 9% this year. That compares with the S&P 500, which is up about 19% year to date.
The company’s shares closed at $425.99 on Thursday, giving it a market value of about $20.97 billion.
