Ulta Salon, Cosmetics & Fragrance, Inc. (NASDAQ:ULTA), Target Corporation (NYSE:TGT) – Ulta Rallies On Q1 Earnings: 2 Analyst Takes

Ulta Beauty, Inc. (NASDAQ: ULTA) inventory closed greater than 5% increased Friday after the sweetness retailer posted a primary-quarter beat and lift, with $1.9 billion in internet gross sales — up 65.2% from $1.2 billion one 12 months earlier and beating the $1.64-billion Street estimate. 
Ulta’s first-quarter internet revenue was $230.3 million in comparison with a internet lack of $78.5 million within the first quarter of fiscal 2020.
Its diluted earnings per share was $4.10, together with a 3-cent profit because of revenue tax accounting for share-based mostly compensation, versus $1.39 within the first quarter of 2020. 
“We have emerged from 2020 with sturdy momentum in our gross sales traits, market share positive aspects, and shopper sentiment,” Ulta President Dave Kimbell mentioned in an announcement.
Two Ulta analysts reacted to the retailer’s first-quarter efficiency, remarking on its bounce again from the worst of the pandemic whereas mentioning a number of lingering points that would sluggish its monetary progress.
Raymond James On Ulta: Joseph Altobello, fairness analysis analyst at Raymond James, maintained a Market Perform ranking on Ulta. Ulta posted “very spectacular 1Q outcomes that not solely demonstrated substantial progress over a depressed COVID-impacted base interval, however maybe extra importantly over 1Q19 outcomes as nicely on gross sales, margins, and earnings,” the analyst mentioned. 
Altobello elevated his forecast for fiscal years 2021 and 2022 adjusted EPS from $9.15 to $11.95 and from $10.15 to $13.25, respectively.
He additionally echoed Ulta’s acknowledgment from its earnings report that a lot of its success was pushed by the waning of the COVID-19 pandemic and the infusion of federal stimulus funds into customers’ wallets.
While Ultamate Rewards loyalty membership was down 2% from one 12 months earlier, it was additionally up 5% from the earlier quarter, “reflecting a robust restoration amid retailer reactivations,” Altobello mentioned, regardless of the social distancing necessities nonetheless in place all through the quarter.
The analyst warned that Ulta’s brick-and-mortar operations gave him a motive to be involved about its progress.
“Given the uncertainty and fluidity because it pertains to the sustainability of future in-retailer site visitors, we proceed to counsel traders await a extra enticing entry level on this top quality title, notably given the constructive transfer in aftermarket buying and selling.” 
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Telsey On Ulta: Dana Telsey, CEO and chief analysis officer at Telsey Advisory Group, maintained an Outperform on Ulta and raised the worth goal from $375 to $400.
Telsey applauded the corporate’s “higher-than-anticipated outcomes throughout the board,” with a gross margin that “expanded 1,300 bps to 38.9% (up 190 bps vs. 1Q19), attributable to mounted value leverage on the stronger topline efficiency in addition to improved merchandise margins, decrease salon prices, and a positive channel shift.”
The analyst highlighted Ulta’s forecast of delivering an roughly 11% working margin for the complete fiscal 12 months, “which compares favorably to the consensus of 9.7% and the 5.7% recorded in FY20, although barely beneath the 12.2% reported in FY19.”
Furthermore, Telsey additionally remarked on the CEO turnover, stating that the sturdy first-quarter efficiency will facilitate a better handoff, and he or she expressed confidence within the upcoming partnership between Ulta and Target (NYSE: TGT), with the primary wave of Ulta outlets opening inside Target this summer season.
Still, Tesley acknowledged that there may very well be a number of points that might disrupt an in any other case copacetic image.
“Ulta continues to count on to open 40 new shops however now goals to rework 19 shops, down from 21 beforehand,” she wrote. “Labor, wages, gasoline, and transportation prices are anticipated to proceed to strain margins within the again half of the 12 months, and promoting within the second half is predicted to be barely increased vs. preliminary expectations.”
(Photo by Michael Rivera/Wikimedia Commons.)

Latest Ratings for ULTA

DateFirmActionFromTo

May 2021Deutsche BankMaintainsBuy
May 2021Wells FargoMaintainsOverweight
May 2021OppenheimerMaintainsOutperform

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