Ulta Beauty Amazon shares fell 7% in extended trading Thursday after the company missed second-quarter results and cut its full-year guidance following a recent drop in same-store sales.
This was the company's first decline in earnings per share since May 2020 and its first decline in revenue since December 2020.
Comparable sales for the second quarter fell 1.2%, compared with an 8% increase a year earlier and well below the 1.2% growth Wall Street analysts had expected, according to StreetAccount.
“While we are encouraged by many positive indicators across our business, second quarter performance fell short of our expectations, primarily due to lower comparable store sales,” CEO Dave Kimball said in a press release. “We are clear about the factors that negatively impacted our store performance, and we have taken action to address the trends.”
During the company's earnings call, Kimball attributed the sales decline to four main factors, including “unexpected operational disruption” due to a change in store systems as well as the disappointing impact of promotions.
The company has also struggled with what Kimble described as consumers who are increasingly cautious in their spending and increased competition in the beauty industry. Kimble acknowledged that Ulta’s market share is being challenged and said that while the company maintained its share in mass cosmetics during the biggest quarter, it lost share in the prestige cosmetics segment driven by makeup and hair categories, according to Circana data cited by Kimble.
It's not uncommon for stores to see a short-term negative impact on sales due to competitors opening or being acquired by new Ulta beauty stores, but Kimball said the scope and pace of change now was unusual, adding that 80% of stores were affected.
“We know we are still in the thick of this … these competitive pressures are likely to continue in the near term, but the positive signals … in our broader business, guest engagement, the impact of newness, the impact of our new stores, the success of our salon business, the growth in loyalty, all of those factors point to us and give us a lot of confidence that our business remains fundamentally strong and healthy,” Kimball said.
The company now expects full-year same-store sales to decline in the range of 2% to 2%, compared to previous guidance of growth of 2% to 3%.
“Our updated sales forecast assumes that it will take more time for our actions to change the trajectory of the top line and that stores impacted by multiple competitive openings will continue to be pressured,” said Paula Uibo, the company’s chief financial officer.
Ulta now also expects full-year revenue of $11 billion to $11.2 billion, down from previous guidance of $11.5 billion to $11.6 billion, and full-year earnings per share of $22.60 to $23.50, down from previous guidance of $25.20 to $26.
Here's how the beauty retailer performed in the period ending Aug. 3 compared to what Wall Street was expecting, based on a survey of analysts conducted by LSEG:
Earnings per share: $5.30 vs. $5.46 expectedRevenue: $2.55 billion vs. $2.61 billion expected
The company reported net income of $252.6 million, or $5.30 per share, compared with $300.1 million, or $6.02 per share, during the same quarter last year.
Revenue rose to $2.55 billion, compared to $2.53 billion in the previous year.
Earlier this month, Warren Buffett’s Berkshire Hathaway disclosed a $266 million stake in the beauty retailer, sending Ulta shares soaring. For some analysts, it was confirmation that the stock was oversold after falling 32% in 2024 to that point, and 26% in the second quarter alone.
Ulta shares have been struggling since CEO Dave Kimble warned of slowing demand for cosmetics at an investor conference in April. Kimble said that while he expected a downturn, the downturn was “a little bit faster and a little bit stronger” than he had anticipated.
During the company's first-quarter earnings call in May, Kimball outlined plans to boost sales that included five key areas: product assortment, social brand relevance, enhancing the consumer's digital experience, strengthening the loyalty program and developing the company's promotional tools.
On the same call, Kimball also said the beauty retailer will expand its partnership with the delivery service later this year. Doordashwill begin testing new gaming platforms and will implement new marketing technology to personalize the shopping experience for customers.
This time around, Kimball said executives have identified other opportunities within the transformation plan they’ve been trying to implement, such as relaunching Ulta’s beauty collection and offering new personalized product recommendations to consumers online. The company is also focusing on increasing the value of its rewards program through member-only events and exclusive member-only offers.
Clarification: This story has been updated to clarify that Ulta Beauty expects full-year earnings per share in the range of $22.60 to $23.50, down from a previous forecast of $25.20 to $26.
