Ulta Beauty Shares fell 7% in prolonged trading Thursday as the corporate missed expectations for the second quarter and revised down its full-year forecast following a decline in like-for-like sales within the recent period.
This was the corporate’s first earnings per share loss since May 2020 and its first revenue loss since December 2020.
According to StreetAccount, comparable sales fell 1.2 percent within the second quarter, compared with an 8 percent increase a yr earlier, well below the 1.2 percent growth that Wall Street analysts had expected.
“While we are encouraged by many positive indicators across our business, our second quarter performance did not meet our expectations, primarily due to a decline in comparable store sales. We are aware of the factors that negatively impacted our store performance and we have taken actions to counteract the trends,” CEO Dave Kimbell said in a press release.
During the corporate’s earnings call, Kimbell attributed the decline in sales to 4 primary aspects, including an “unforeseen operational disruption” because of a change in store systems and disappointing promotional impacts.
The company also suffered from what Kimbell described as consumers becoming more cautious about their spending and increased competition in the sweetness industry. Kimbell acknowledged that Ulta’s market share is being challenged, saying that although the corporate was able to keep up its share within the mass cosmetics sector during its biggest quarter, it lost market share within the prestige beauty sector, driven primarily by makeup and hair care, based on Circana data Kimbell cited.
It isn’t unusual for stores to experience short-term negative sales losses because of competitors opening or cannibalization by recent Ulta Beauty stores. However, Kimbell said the size and speed of the present changes are unusual, adding that 80% of stores have been affected.
“We know we’re still in the thick of it… those competitive pressures are likely to continue for the foreseeable future, but the positive signs… across our business, guest engagement, the impact of the new, the impact of our new stores, the success of our salon business, the growth of customer loyalty, all of those factors point to us and give us a lot of confidence that our business continues to have fundamental strength and health,” Kimbell said.
The company now forecasts like-for-like sales for the total yr to be unchanged to a decline of two percent. The previous forecast was for growth of two to a few percent.
“Our updated sales forecast assumes that our actions will take more time to change sales trends and that stores affected by numerous new openings by competitors will continue to be under pressure,” said Chief Financial Officer Paula Oyibo.
Ulta also now expects annual sales of $11 billion to $11.2 billion (up from a previous forecast of $11.5 billion to $11.6 billion) and annual earnings per share of $22.60 to $23.50 (up from a previous forecast of $25.20 to $26).
This is how the sweetness retailer carried out within the period as much as 3 August in comparison with Wall Street expectations based on an analyst survey conducted by LSEG:
- Earnings per share: USD 5.30 versus expected USD 5.46
- Revenue: $2.55 billion in comparison with expected $2.61 billion
The company reported net income of $252.6 million, or $5.30 per share, in comparison with $300.1 million, or $6.02 per share, in the identical quarter last yr.
Sales rose from $2.53 billion within the previous yr to $2.55 billion.
Earlier this month, Warren Buffet’s Berkshire Hathaway announced that he owns $266 million within the cosmetics retailer, sending Ulta shares soaring. For some analysts, this was confirmation that the stock was oversold after falling 32% to that time and plunging 26% within the second quarter alone.
Ulta’s shares have been suffering since CEO Dave Kimbell warned of a slowdown in demand for beauty products at an investor conference in April. Kimbell said that while a decline had been expected, it hit the corporate “a little sooner and a little harder” than expected.
During the corporate’s first-quarter conference call in May, Kimbell outlined plans to extend sales that included five key areas: product assortment, social brand relevance, improving the digital customer experience, expanding the loyalty program and evolving the corporate’s promotional efforts.
In the identical call, Kimbell also said the cosmetics retailer will expand its partnership with the delivery service later this yr. DoorDashwould start testing recent gamification platforms and activate recent marketing technologies to personalize the client shopping experience.
This time, Kimbell said, management has identified additional opportunities throughout the turnaround plan, similar to relaunching Ulta’s own beauty collection and introducing recent personalized product recommendations to consumers online. The company can be specializing in increasing the worth of the rewards program through exclusive member events and member-exclusive offers.
Clarification: This story has been updated to make clear that Ulta Beauty forecast full-year earnings per share of $22.60 to $23.50, down from previous guidance of $25.20 to $26.
