Listen to this article
Give us your feedback Thank you for your feedback.
What do you think?
A holiday forecast that was less rosy than expected pressured shares of Ulta in after-hours trading on Thursday, despite the beauty retail chain’s healthy growth in quarterly profit.
The US company said that it is looking for earnings per share between $2.73 and $2.78 in the current quarter, which includes the all-important holiday shopping season. That is less than the $2.83 that analysts surveyed by Factset had been expecting.
Growth in comparable sales — a key industry metric that measures sales in stores open at least a year — is also poised to come in between 8 and 10 per cent, versus 16.6 per cent in the same period a year earlier.
That sort of growth would be the envy of many retailers as the industry is broadly struggling to shore up sales amid falling foot traffic and increasing competition from digital rivals. However, Ulta has been plagued in recent months by concerns that it will be unable to sustain the blistering growth that made it a Wall Street favourite in recent years.
For the quarter ending October 28, Ulta sales increased 18.6 per cent year-over-year to $1.34bn, in line with analysts’ estimates. The gain came despite a $14m dent from Hurricanes Harvey and Irma, as well as a slowdown in the growth of its largest category, makeup, according to chief executive Mary Dillon.
Comparable sales rose 10.3 per cent, a whisker under the 10.4 per cent estimate, and down from the 16.7 per cent increase posted during the same period last year. Net income rose 19.5 per cent to $104.6m, compared to expectations for $103m, while earnings per share bumped up 21.4 per cent to $1.70, ahead of estimates for $1.66.
“Our third quarter results clearly demonstrate the strength and distinct advantages of the Ulta Beauty business model,” Ms Dillon said in a statement. While retail has been struggling broadly over the past few years beauty retailers have been a rare bright spot, and Ulta in particular looked to lure in shoppers from all price tiers by stocking both mass-market and high-end products.
After registering percentage growth above 30 per cent a year for the past three years, Ulta shares are down 12 per cent so far in 2017. Shares dipped 6.6 per cent in after-hours trading.