- Cosmetics and Fragrance company Ulta Beauty topped earnings and sales estimates, and boosted its guidance as shoppers continued to purchase beauty products despite higher prices.
- Comparable sales (sales for stores open at least 14 months and e-commerce sales) for the fiscal third quarter jumped 14.6% year over year to $2.34 billion. This was driven by a 10.7% increase in transactions and a 3.5% increase in the average basket price. The skincare, hair care, fragrance and bath categories all delivered double-digit comparable sales growth year-over-year.
- Gross profit was up 22% to $962.8 million – with the gross profit margin coming in at 41.2%, up 160 basis points from the year ago period. This was primarily due to leverage in fixed costs, strong growth in other revenue, and higher merchandise margins. The improved gross margin was partially offset by higher inventory costs associated with carrying additional stock for new brand launches.
- Despite expenses creeping up 18.6% in the period, Ulta managed to increase net income by 27.5% to $274.6 million, or $5.34 per share. This was because of the continued resilience of the beauty category, as well retail price increases, and the impact of new brands and product innovations.
- Ulta ended the period with cash and cash equivalents of $250.6 million.
- The retailer is now estimating full year comparable sales to rise between 12.6% to 13.2%, up from previous forecasts of 9.5% to 10.5%. Revenue is expected to come in between $9.95 billion and $10 billion, and earnings are likely to be in a range between $22.60 and $22.90 per share.
- We do not own shares in Ulta, but instead are holders of Estee Lauder in the beauty industryspace for global managed portfolios and the Cratos BCI Worldwide Flexible Fund. We are, however, encouraged by the update Ulta provided and its outlook for the sector.
By Lee Kern
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