Ulta Beauty plans 80 new stores despite Q2 miss
The nation’s largest beauty retailer is not letting a miss on Wall Street expectations dampen its store opening/refresh program.
Ulta Beauty plans to open 80 approximately new stores, execute approximately 20 remodel or relocation projects and complete approximately 270 store refreshes by the end of fiscal 2019. The retailer is maintaining these objectives even in the face of coming up short of analyst predictions for second-quarter net sales, adjusted earnings per share, and same-store sales.
Ulta reported second-quarter net sales of $1.67 billion, up 12% from $1.49 billion the same quarter a year earlier but short of an expected $1.68 billion. Net income totaled $161.2 million, up 8% from $148.3 million. Adjusted earnings per share of $2.76 missed projections of $2.80, while a 6.2% increase in same-store sales did not meet estimates of a 6.6% rise.
On an earnings call, Ulta Beauty CEO Mary Dillion said Ulta’s underperformance is indicative of weakness in the broader US cosmetics industry.
“Ulta Beauty continues to drive meaningful market share growth in makeup across mass and prestige but it’s clear that cosmetics in the overall U.S. market is challenged,” said Dillon. “The most recent cycle of innovation has just not driven those behaviors, resulting in a soft cycle for the cosmetics category in the U.S. as innovation and newness brought to the market has not driven the expected growth.”
For the full fiscal year, Ulta Beauty released revised guidance including total sales growth between 9% and 12% (previously low double-digit growth); same-store sales growth of approximately 4% to 6% (previously 6% to 7%), including e-commerce growth of 20% to 30%; and diluted earnings per share in the range of $11.86 to $12.06 (previously $12.83 to $13.03), including the impact of approximately $700 million in share repurchases and assuming a 23% effective tax rate (previously 24%).
ULTA’s miss is a grand slam home run for 90% of most retailers. We can’t expect double digit growth to last forever. A very impressive company and performance run for many years now.