Ulta Beauty Surges After Crushing Q3 Estimates, Raises Outlook
The beauty retailer's shares jumped in after-hours trading as it reported a significant earnings beat and boosted its full-year forecast, signaling strong consumer demand.
Shares of Ulta Beauty Inc. climbed in after-hours trading Thursday after the company posted third-quarter results that significantly outperformed Wall Street expectations and raised its financial outlook for the full year, a sign of resilient consumer spending in the beauty sector.
The Bolingbrook, Illinois-based retailer reported diluted earnings per share of $5.14 on net sales of $2.86 billion for the quarter ending in October. The performance comfortably beat analyst consensus, which had projected earnings of around $4.60 per share on revenue of $2.70 billion. The stock, which closed the regular session at $533.95, saw immediate buying interest in extended trading following the 4:00 PM Eastern release.
The robust results were driven by a strong 6.3% increase in comparable sales, a key metric for retailers that measures sales in stores open for at least one year. This growth demonstrates Ulta's ability to attract and retain customers despite broader concerns about inflation and pressures on consumer discretionary spending.
"Our third quarter results exceeded our expectations, reflecting the steady progress and momentum our team is building," said Kecia Steelman, President of Ulta Beauty, in a statement accompanying the results. Steelman credited the performance to new product assortments, enhanced digital experiences, and effective marketing campaigns that resonated with shoppers.
Building on the strong quarterly performance, Ulta's management provided a bullish forecast for the remainder of its fiscal year. The company now expects diluted earnings per share to be in the range of $25.20 to $25.50, a significant increase from its prior guidance of $23.85 to $24.30. Full-year comparable sales growth is now projected to be between 4.4% and 4.7%, up from a previous forecast of 2.5% to 3.5%.
The upgraded outlook suggests the company is confident in its strategic initiatives and its position heading into the critical holiday shopping season. Ulta has successfully blended mass-market and prestige brands, creating a one-stop shop for beauty enthusiasts. Its loyalty program remains a key asset, fostering repeat business, while its store-in-store partnership with Target has expanded its reach to a wider consumer base.
The performance stands out in a mixed retail environment where some companies have struggled as consumers pull back on non-essential goods. Ulta’s results, however, reinforce the "lipstick effect" theory, where consumers continue to purchase small luxury items like cosmetics even during times of economic uncertainty.
According to regulatory filings, the company's gross profit margin remained healthy, and management effectively controlled costs during the quarter. The beat and subsequent guidance raise will likely lead to positive revisions from Wall Street analysts, who had set a consensus 12-month price target of around $577 per share ahead of the report.
Investors will now look to the company's earnings call for further details on product category performance, inventory levels, and management’s perspective on consumer health and promotional activity for the fourth quarter. The strong report positions Ulta Beauty as a standout performer in the consumer discretionary sector as the calendar year comes to a close.