Ulta Beauty Earnings: The Makeup Industry Comes Roaring Back

Ulta Beauty (NASDAQ:ULTA) had loads of excellent news for buyers in its newest earnings replace. Revenue and earnings each exceeded the tempo set by administration’s full-year forecast because of a pointy visitors rebound at its shops.
The outcomes seemed nice in comparison with the year-ago interval when COVID-19 had devastated the enterprise. But Ulta’s newest metrics additionally set new information for the corporate in key areas like gross sales, placing it in place to completely rebound in 2021.

Image supply: Getty Images.

Surprise development
The huge shock was development. Heading into the announcement, Wall Street analysts had been searching for gross sales to develop 40% yr over yr to $1.6 billion. That enhance would have marked a strong rebound over final yr whereas maintaining Ulta’s enterprise under its 2019 ranges.
Instead, income jumped 65% to $1.94 billion, simply crusing previous the $1.74 billion the corporate reported in fiscal 2019, its final pre-COVID first-quarter efficiency. The firm obtained assist from a booming e-commerce section, however the greatest issue was a 53% spike in buyer visitors.
Comparable-store gross sales grew 7% in comparison with 2019, administration mentioned. “We have emerged from 2020 with sturdy momentum in our gross sales tendencies, market share positive aspects, and client sentiment,” firm president Dave Kimbell mentioned in a press launch.
Higher client spending
The earnings haul benefited from just a few constructive components, together with rising common spending, increased costs, and a tilt in demand towards premium merchandise within the make-up, hair care, and skincare niches. Gross revenue landed at 38.9% of gross sales in comparison with 37.0% two years in the past. Operating margin was equally sturdy at 15.8% in comparison with 13.6%. Overall, web earnings surged to $230 million, reversing the prior yr’s $79 million loss.
Cash movement was sturdy, and Ulta ended the interval in a versatile stock place because of the spiking demand. “The staff delivered an excellent begin to the yr,” CEO Mary Dillon mentioned, “with gross sales and earnings exceeding fiscal 2020 and financial 2019 first-quarter ranges.”
An enormous improve to the outlook
Ulta’s new outlook for fiscal 2021 is way stronger than the one administration issued simply three months in the past. Executives now see comparable-store gross sales rising between 23% and 25% in comparison with the prior forecast of 15% to 17%. That enhance implies the chain will greater than absolutely rebound from the pandemic this yr, quite than subsequent yr.
The earnings forecast obtained a giant improve too with working margin anticipated to achieve 11%, up from 9%. While that is nonetheless decrease than the 12.1% Ulta reported in 2019, the pattern suggests it will not be lengthy earlier than Ulta can begin increasing its profitability.
All that excellent news offers the corporate flexibility to pursue new retailer openings via its partnership with Target. That initiative supplies a beneficial development avenue, however Ulta’s surging buyer visitors additionally reveals its retailer base has room to increase past the present 1,300 areas.
Investors had been frightened that this retailer footprint was destined to slowly inch increased over the following few years. But if Ulta can maintain setting new visitors information, administration can goal quicker retailer launches along with its different development plans.

This article represents the opinion of the author, who might disagree with the “official” suggestion place of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even considered one of our personal — helps us all suppose critically about investing and make selections that assist us turn into smarter, happier, and richer.

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About the Author: Jessica