Ulta Beauty Shares sank 7% in full trading Friday as the company fell short of second-quarter expectations and trimmed full-year guidance after a decline in same-store sales during the most recent period.
This is the company’s first earnings per share since May 2020 and its first loss since December 2020.
Comparable sales for the second quarter fell 1.2%, compared with an 8% increase a year earlier and lower than the 1.2% growth Wall Street analysts had expected, according to StreetAccount.
“While we are encouraged by many positive indicators in our business, our second quarter performance did not meet our expectations, driven primarily by a decline in same-store sales. We are working to address these trends,” said CEO Dave Kimbell in a press release.
During the company’s earnings call, Kimbell attributed the declining sales performance to four main factors, including “unanticipated operational disruptions” due to changes in store systems as well as the disappointing impact of promotions.
The company also suffered from what Kimbell described as consumers becoming more cautious with their spending and from increased competition in the beauty industry. Kimbell acknowledged that Ulta’s market share is being challenged and said that while the company has maintained its focus on mass beauty for most quarters, it lost ground in the prestige beauty sector driven by the makeup and hair categories, according to Circana data, cited by Kimbell.
It’s not uncommon for stores to experience short-term negative sales impacts due to competitor openings or cannibalization by new Ulta beauty stores, but Kimbell said the scale and change is unusual now, adding that 80% of stores have been affected. .
“We know that we are still in the middle of this … this competitive pressure will continue for a long time, but the positive signals … our new store, the success of our salon business, the growth of loyalty, all factors that advise us and give We have a lot of confidence that our business continues to have strength and underlying health,” said Kimbell.
The company now forecasts full-year same-store sales in the average range of up to a 2% decline, compared to previous guidance of 2% to 3%.
“Our updated sales outlook assumes that it will take more time for our actions to change the trajectory of the top line and stores affected by various competitive openings will continue to be under pressure,” said CFO Paula Oyibo.
Ulta also now expects full-year revenue of $11 billion to $11.2 billion, down from its previous guidance of $11.5 billion to $11.6 billion, and full-year earnings per share of $22.60 to $23.50, down from its previous estimate of $25.20 to $26.
Here’s how the beauty retailer performed in the period ended Aug. 3 compared to Wall Street expectations, based on a survey of analysts by LSEG:
- Earnings per share: $5.30 vs $5.46 expected
- result: $2.55 billion vs $2.61 billion expected
The company reported net income of $252.6 million, or $5.30 per share, compared with $300.1 million, or $6.02 per share, during the same quarter last year.
Revenue rose to $2.55 billion, up from $2.53 billion a year earlier.
Earlier this month, Warren Buffett’s Berkshire Hathaway announced a $266 million stake in the beauty retailer, sending Ulta shares soaring. For some analysts, it’s a validation that the stock is oversold after falling 32% in 2024 to that point, down 26% in the second quarter.
Ulta shares have suffered since CEO Dave Kimbell warned of cooling beauty demand at an investor conference back in April. Kimbell said there were setbacks, but the company was “a little earlier and bigger” than anticipated.
During the company’s first-quarter earnings call in May, Kimbell outlined plans to boost sales that included five key areas: product variety, brand social relevance, improving consumers’ digital experience, improving loyalty programs and expanding the company’s promotional levers.
On the same call, Kimbell also said that the beauty retailer later this year will develop partnerships with delivery services DoorDashwill begin testing new gamification platforms and will enable new marketing technologies to create customer shopping experiences.
This time around, Kimbell said executives have identified more opportunities in their attempted turnaround plan, such as launching Ulta’s own beauty collection and introducing new personalized product recommendations for online consumers. The company also focuses on increasing the value of its rewards program through member-only events and member-level exclusive offers.
Clarification: This story has been updated to clarify that Ulta Beauty’s full-year earnings estimate ranged from $22.60 to $23.50, down from its previous forecast of $25.20 to $26.
