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Ulta Beauty said growth is slowing after a boom during the pandemic.
The time of dreams
Ultimate Beauty
Shares tumbled on Friday morning as the beauty retailer slashed its operating margin expectations and warned investors of moderate growth.
On Thursday after the market closed, Ulta (ticker: ULTA) generated earnings of $6.88 per share in the fiscal first quarter that ended in April, narrowly beating estimates of $6.82 among analysts followed by
set of facts
.
Same-store sales, which measures revenue online and in stores open for at least 14 months, rose 9.3%, slightly below estimates of 9.4%.
Average ticket, or sales per customer, was down 1.5% in the quarter from a year ago. It was its first decline in more than five years, according to Wells Fargo analyst Ike Boruchow.
CEO David Kimbell said while the importance of skincare and general wellness should continue to emerge from the pandemic, the high level of growth the company has experienced over the past two years will moderate. and will eventually return to the historic high end. mean.
Ulta’s stock fell more than 10% to $435.50 in premarket trading on Friday. It was a Barrons stock selection in February.
Consumers reduced their purchases in the face of high inflation and recession fears.
Foot locker
(FL) and
american eagle
(
AEO
), aimed in part at low-income consumers, predict a slowdown in sales.
Boruchow reiterated its equivalent underweight or sell rating on Ulta shares after the report. “We’ve hit a speed bump,” he said, referring to the slowdown after years of rapid growth driven by beauty demand and his own rewards program. The analyst cut his price target to $350 from $400 earlier.
Ulta shares are trading at 18.9 times its next 12-month earnings, cheaper than its own five-year historical average of 23 times.
JP Morgan analyst Christopher Horvers stuck to his overweight rating. He agrees that Ulta isn’t immune to weaker consumer spending, but is more resilient in part because of its position as the only national beauty retailer to carry beauty products. prestige and mass as well as hair care brands. Horvers reduced its target from $575 to $545, which still implies a gain of around 25% from current levels.
Ulta, a bit like
TJX
cos. (TJX),
General dollar
(DG), also discussed issues ranging from discount to theft and loss of items. Operating margin for the full year was reduced to between 14.5% and 14.8% compared to an earlier projection of 14.7% to 15.0%.
Write to Karishma Vanjani at karishma.vanjani@dowjones.com.
