Divine Beauty on Thursday beat Wall Street expectations for the third fiscal quarter, fending off fears of stiff competition and declining demand for cosmetics and skin care.
The retailer raised its full-year outlook slightly to show better-than-expected results. For the fiscal year, it said it now expects net sales to range from $11.1 billion to $11.2 billion, compared to its previous guidance of $11 billion to $11.2 billion.
It said it now expects annualized earnings to range from $23.20 to $23.75, up from $22.60 to $23.50. For the full year, the comparable sales forecast ranges from a 1% decline to a lower one. The trailing sales metric is sales at Ulta stores open for at least 14 months, as well as online sales.
Despite the revised outlook, the company expects comparable sales for the holiday quarter to decline in the low single digits.
In a press release, CEO Dave Kimbell said he is “proud of the progress” the company has made and is “encouraged by early signs that our efforts to strengthen our market position and improve efficiency are gaining momentum.”
Here’s what the beauty retailer said in the three months ending Nov. 2 compared to what Wall Street expected, based on a survey of LSEG analysts:
- Earnings per share: $5.14 vs. $4.54 expected
- Net worth: $2.53 billion versus $2.50 billion expected
Shares of Ulta rose more than 10% in after-hours trading.
Beauty has been a strong category for many retailers, taking a hit over the past few years as inflation stretched household budgets and many consumers pulled back on voluntary purchases. The consolidation of the category resulted in companies that included The target, Walmart, Kohl’s again Macy’s expanding their offering of cosmetics and skin care products.
But Ulta first hinted at potential problems in April, warning Kimbell about cooling demand for beauty at an investor conference.
In recent quarters, Ulta’s results have reflected discerning shoppers and heightened competition. The company missed earnings results and cut its full-year outlook in August after same-store sales fell. It marked the first time the retailer has missed Wall Street expectations in nearly four years.
The company’s shares also fell. As of late Thursday, Ulta’s stock is down about 19% so far this year, trailing the S&P 500’s roughly 28% gains over the same period.
For the third fiscal quarter, the retailer reported net income of $242.2 million, or $5.14 per share, compared to $249.5 million, or $5.07 per share, in the year-ago quarter.
Revenue was up from $2.49 billion in the year-ago period.
Comparable sales rose 0.6% year-over-year, as the retailer saw slight increases in traffic and the average ticket.
Customer transactions across its website and stores grew 0.5% year-over-year, and the average ticket, the amount spent by shoppers during that visit, increased 0.1% year-over-year.
On the company’s earnings call, Kimbell said new product launches, the rollout of digital tools and in-store events helped drive Ulta’s better performance in the quarter.
For example, he said, Ulta is selling a special makeup line tied to the release of Universal’s “Bad” movie. It also added new online features, including visual try-on enhancements and new digital shopping guides. It also had in-store events, including workshops where customers received training from Ulta stylists on how to get “salon-worthy brows.”
For beauty retailers, including Ulta, the holidays are a critical time of year. Kimbell said the company was “encouraged by our performance on Cyber Monday.”
However, he revealed a background that is still challenging. He said the company is ready for the shopping season, as “our data suggests that economic concerns continue to focus more on value.”
On the earnings call, CFO Paula Oyibo said the company continues to “closely monitor consumers and the operating environment” and put it in its forecast. He said the compressed holiday season, with five fewer days between Thanksgiving and Christmas, could hurt sales.
Disclosure: Comcast is the parent company of NBCUniversal and CNBC. NBCUniversal is not distributing “Bad.”
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