Ulta Beauty Shares fell 7% in after-hours trading on Thursday after the company reported weaker-than-expected second-quarter results and lowered its full-year outlook after same-store sales fell in the latest period.
This is the company’s first earnings per share miss since May 2020 and its first revenue miss since December 2020.
Same-store sales fell 1.2 percent in the second quarter after growing 8 percent in the same period a year ago, according to Street accounts, well below the 1.2 percent increase Wall Street analysts had expected.
“While we are encouraged by many positive metrics across our business, our second quarter results did not meet expectations, primarily due to declining same-store sales. We are clear about the factors that negatively impacted our store performance and are taking steps to address those trends,” CEO Dave Kimbell said in a press release.
During the company’s earnings call, Kimbell cited four main factors for the sales decline, including “unforeseen operational disruptions” caused by changes to store systems and the disappointing impact of promotions.
The company has also struggled with what Kimbell said are increasingly cautious consumers spending and increased competition in the beauty industry. Kimbell acknowledged that Ulta’s market share is under threat, citing Circana data that she said showed the company maintained its share in mass beauty but lost share in the prestige beauty segment, which is driven by the makeup and haircare categories.
While it’s not uncommon for stores to see short-term negative impacts on sales due to competitor openings or rising competition from new Ulta Beauty stores, Kimbell said the scale and pace of the current changes is unusual, adding that 80 percent of stores are affected.
“We recognize that we’re still in the middle of this. Those competitive pressures will continue in the near term. But the positive signs across our business, customer engagement, the impact of newness, the impact of new stores, the success of our salon business, growing customer loyalty — all of these factors suggest that our business remains fundamentally strong and healthy and give us great confidence,” Kimbell said.
The company now expects full-year same-store sales to be flat to down 2%, lower than its previous outlook of growth of 2% to 3%.
“Our updated sales outlook assumes that our initiatives will take more time to change the trajectory of sales and that stores impacted by multiple competitor store openings will continue to be under pressure,” Chief Financial Officer Paula Oyibo said.
Ulta also now expects full-year sales of $11 billion to $11.2 billion, down from its previous outlook of $11.5 billion to $11.6 billion, and full-year earnings per share of $22.60 to $23.50, down from its previous outlook of $25.20 to $26.
Beauty retailer It was carried out until August 3rd. That compares with Wall Street expectations, based on LSEG’s analyst survey.
- Earnings per share: $5.30 vs. expected price of $5.46
- Revenue: $2.55 billion vs. expected $2.61 billion
The company reported net income of $252.6 million, or $5.30 per share, compared with $300.1 million, or $6.02 per share, in the year-ago period.
Revenue increased to $2.55 billion from $2.53 billion in the same period last year.
Ulta shares soared earlier this month after Warren Buffett’s Berkshire Hathaway revealed it had a $266 million stake in the beauty retailer. For some analysts, that was evidence that the company was oversold after its shares fell 32% by that point in 2024, including a 26% drop in the second quarter alone.
Ulta’s stock has been sluggish since CEO Dave Kimbell warned of a slowdown in demand for beauty products during an investor call in April. Kimbell said the stock price decline was expected but hit the company “a little earlier and a little harder” than expected.
During the company’s first-quarter earnings call in May, Kimbell outlined a plan to drive sales across five key areas: product assortment, the brand’s social relevance, improving consumer digital experiences, strengthening loyalty programs and evolving the company’s promotional offerings.
On the same conference call, Kimbell said the beauty retailer plans to expand its partnerships with delivery services later this year. DoorDashhas begun testing a new gamification platform to enable new marketing techniques to personalize customers’ shopping experiences.
Kimbell said executives have now identified additional opportunities as they work through the turnaround plan, including relaunching Ulta’s own beauty collection and introducing personalized new product recommendations for consumers online. The company is also focusing on increasing the value of its rewards program through exclusive member events and tiered offers exclusive to members.
Clarification: This story has been updated to clarify that Ulta Beauty now expects full-year earnings per share of $22.60 to $23.50, down from its previous forecast of $25.20 to $26.
