Ulta Beauty (ULTA, Financial) exceeded its fourth-quarter earnings, revenue, and comparable sales predictions, announced plans for international expansion, and approved a $2.0 billion share repurchase program. Despite these achievements, the company's mixed financial guidance for FY25 has led to a lackluster response from investors.
Prior to the Q4 earnings report, there was significant optimism surrounding Ulta Beauty, fueled by positive sales growth in the cosmetics industry observed at retailers like Kohl's (KSS, Financial) and Target (TGT, Financial), as well as manufacturers e.l.f. Beauty (ELF, Financial) and Coty (COTY, Financial). This set high expectations for ULTA, which were dampened by the company's FY25 earnings per share (EPS) projection falling below consensus, leading to a decline in stock price.
Despite today's downturn, ULTA's stock has shown resilience, maintaining a positive trajectory for the year and experiencing a roughly +40% increase since late October. This reflects ongoing enthusiasm for the beauty market's robustness.
- Q4 Highlights:
- Earnings rose 21% year-over-year to $8.08 per share.
- Revenue increased by 10% to $3.55 billion.
- Comparable store sales grew by +2.5%, driven by a 4.5% rise in transactions.
- Market Share and Competition:
- ULTA gained market share in the mass market category.
- Skincare and fragrance sectors saw double-digit growth.
- Makeup and hair care experienced a decline in comparable sales.
- International Expansion:
- Plans to enter the Mexican market in 2025 through a joint venture with Axo.
- This marks ULTA's first expansion outside the U.S.
- Economic Challenges and Outlook:
- Anticipates moderated growth due to increased competition.
- Projects FY25 revenue of $11.70-11.80 billion and comp growth of +4.0-5.0%.
- Expects slight gross margin compression in FY25.
Despite the setback from its FY25 guidance, ULTA's Q4 report had several positive aspects. The company's strong performance over the past few months, supported by solid demand in the beauty sector, positions it well to capitalize on future opportunities. However, the recent earnings guidance has prompted some investors to take profits.
