Ulta Earnings Q2 2024

Ulta Beauty Shares fell 7% in extended trading Thursday as the company missed expectations in the second quarter and cut its full-year guidance after same-store sales fell in the latest period.

This is the first time the company has seen earnings per share miss since May 2020 and the first time revenue has missed since December 2020.

Comparable sales in the second quarter fell 1.2%, compared with an 8% increase the year before and well below the 1.2% growth Wall Street analysts expected, according to StreetAccount.

“While we were encouraged by many positive metrics across our business, our second quarter performance fell short of expectations, primarily due to a decline in comparable store sales. We understand the factors negatively impacting our store performance and are taking actions to address the trends,” CEO Dave Kimbell said in a press release.

During the company’s earnings call, Kimbell attributed the decline in sales performance to four main factors, including “unforeseen operational disruptions” due to store system changes as well as disappointing impact from promotions.

The company has also been hit by what Kimbell described as consumers becoming more cautious about their spending and by increased competition in the beauty industry. Kimbell acknowledged that Ulta’s market share is being challenged, saying that while the company has maintained its market share in mass beauty for most quarters, it has lost market share in the premium beauty category driven by makeup and hair, according to Circana data cited by Kimbell.

It’s not uncommon for stores to experience a short-term negative impact on sales due to competitors opening new stores or being outcompeted by Ulta cosmetics stores, but Kimbell said the scale and speed of the change now is unusual, adding that 80% of stores have been affected.

“We know that we’re still in the middle of this… those competitive pressures are likely to continue for the foreseeable future, but the positive signals… in our overall business, the customer engagement, the impact of newness, the impact of new stores, the success of our salon business, the loyalty growth, all of those factors show us and give us a lot of confidence that our business continues to have underlying strength and health,” Kimbell said.

The company now forecasts full-year same-store sales to be flat to down 2%, compared with its previous forecast of growth of 2% to 3%.

“Our updated outlook for sales assumes that it will take more time for our actions to change the revenue trajectory and that stores impacted by multiple competitive openings will continue to be under pressure,” CFO Paula Oyibo said in a statement.

Ulta also now expects full-year revenue of $11 billion to $11.2 billion, down from its previous guidance of $11.5 billion to $11.6 billion, and full-year earnings per share of $22.60 to $23.50, down from its previous guidance of $25.20 to $26.

This is how cosmetics retailers carried out during the period ending August 3 compared to what Wall Street expected, based on a survey of analysts by LSEG:

• Earnings per share: $5.30 vs $5.46 expected
• Revenue: $2.55 billion vs. $2.61 billion expected

The company reported net income of $252.6 million, or $5.30 a share, compared with $300.1 million, or $6.02 a share, in the same quarter a year ago.

Revenue rose to $2.55 billion, up from $2.53 billion the year before.

Earlier this month, Warren Buffet’s Berkshire Hathaway revealed a $266 million stake in cosmetics retailer Ulta, sending shares soaring. For some analysts, that’s authenticate that the stock was oversold after falling 32% in 2024 so far, down 26% in the second quarter alone.

Ulta’s stock has fallen sharply since CEO Dave Kimbell warned about cool beauty demand at an investor conference in April. Kimbell said that while the pullback was expected, it hit the company “a little sooner and a little bigger” than anticipated.

During the company’s first-quarter earnings call in May, Kimbell the plan has been outlined to drive sales across five key areas: product assortment, brand relevance on social media, enhancing the consumer digital experience, driving loyalty programs, and developing corporate promotional levers.

On the same call, Kimbell also said the cosmetics retailer will expand its partnership with delivery services later this year. Dash Doorwill begin testing new gaming platforms and enable new marketing technology to personalize the customer shopping experience.

This time around, Kimbell said executives have identified additional opportunities in the turnaround plan, such as relaunching Ulta’s own beauty collection and introducing new personalized product recommendations for online shoppers. The company is also focusing on increasing the value of its rewards program through member-only events and member-exclusive offers.

Clarification: This article has been updated to clarify that Ulta Beauty is forecasting full-year earnings per share of $22.60 to $23.50, down from its previous forecast of $25.20 to $26.