- US retailer delivers head-turning holiday quarter
- Beauty category continues to show resilience
- But Ulta’s comparable sales growth is slowing
Fourth quarter sales and earnings from America’s biggest beauty retailer, Ulta Beauty (ULTA:NASDAQ), beat Wall Street forecasts as shoppers found room in their squeezed budgets for spending on cosmetics over the Christmas selling season.
However, shares in the Illinois-headquartered company, which have outperformed the S&P 500 with a 37% one-year gain, slipped 1.8% lower to $510.75 in after-hours Wall Street trading as a deceleration in same-store sales growth worried investors.
In common with the likes of Estee Lauder (EL:NYSE), L’Oreal (OR:EPA) and Warpaint London (W7L:AIM), ambitious Ulta Beauty is benefiting from the resilience of the beauty category.
Despite the inflation-induced cost-of-living crisis, consumers continue to set aside cash for affordable luxuries like make-up and wellness products.
A THING OF BEAUTY
For the quarter ended 28 January 2023, Ulta Beauty’s same-store sales grew by an impressive 15.6%, well above analysts’ estimates of 8.4% but representing a deceleration from the 21.4% jump delivered in the prior year’s comparable quarter, which seems to have spooked investors.
Encouragingly, Ulta Beauty’s make-up, haircare, skincare and fragrance products all saw double-digit sales growth in the quarter and the wellness segment, which includes everything from nutritional supplements-to-silk pillowcases, generated pretty good growth after the pandemic stoked renewed demand for self-care products.
Ulta Beauty’s fourth quarter net income grew by 17.8% year-on-year to $340.8 million for earnings per share (EPS) of $6.68, ahead of the $5.68 per share analysts were calling for.
Revenue of $3.2 billion was ahead of the market’s $3 billion estimate, driven by price increases and the impact of new brands and product innovation.
Commenting on the full year and fourth quarter results, CEO Dave Kimbell said: ‘For the first time in our 33-year history, Ulta Beauty’s annual revenue surpassed ten billion dollars, our annual net income exceeded one billion dollars, and we exceeded 40 million Ultamate Rewards members.’
He insisted these achievements demonstrate ‘the power of Ulta Beauty’s highly differentiated model, the health of the growing beauty category, and our winning culture and outstanding teams’.
BUT GROWTH IS SLOWING
Looking ahead, Ulta Beauty expects further revenue and earnings growth in 2023, concentrated mostly in the first half.
The company guided towards full year revenue of between $10.95 billion and $11.05 billion, although same-store sales growth guidance of 4% to 5% implies a significant slowdown from 2022’s 15.6% increase.
Ulta Beauty expects to deliver EPS of between $24.70 and $25.40. According to Refinitiv, Wall Street was looking for 2023 revenue of $10.74 billion and earnings per share of $24.25.
