Alta Beauty US stocks on Thursday beat Wall Street's financial expectations for the third quarter of the year, overcoming fears of fierce competition and slowing demand for cosmetics and skin care.
The retailer raised its full-year forecasts slightly to reflect better-than-expected results. For the fiscal year, it said it now expects net sales to range from $11.1 billion to $11.2 billion, compared to its previous guidance of $11 billion to $11.2 billion.
She said she now expects full-year earnings annually to range from $23.20 to $23.75, up from $22.60 to $23.50. For the full year, comparable sales expectations range from down 1% to flat. The comparable sales metric tracks sales at Ulta stores open at least 14 months, along with online sales.
Despite elevated expectations, the company expects comparable sales for the holiday quarter to decline by low single digits.
In a press release, CEO Dave Kimball said he was “proud of the progress” the company has made and “encouraged by early evidence that our efforts to strengthen our market position and drive improved performance are gaining momentum.”
Here's what beauty retailers reported for the three-month period ending November 2 compared to what Wall Street was expecting, based on a survey of analysts conducted by LSEG:
EPS: $5.14 vs. $4.54 expected Revenue: $2.53 billion vs. $2.50 billion expected
Ulta shares rose more than 10% in after-hours trading.
Beauty has been a strong category for many retailers, holding up over the past two years even as inflation strained household budgets and many shoppers pulled back on discretionary purchases. The flexibility of this category has caused companies including goal, Walmart, Cole and Messi To expand its offering of cosmetics and skin care.
However, Ulta began hinting at potential problems in April, with Kimble warning of declining demand for cosmetics at an investor conference.
In recent quarters, Ulta's results have reflected discerning shoppers and increased competition. The company lagged earnings results and lowered its full-year forecast in August after same-store sales declined. It was the first time the retailer missed Wall Street expectations in about four years.
The company's shares also fell. As of Thursday's close, Ulta stock was down about 19% so far this year, lagging the S&P 500's gain of about 28% over the same period.
For the fiscal third quarter, the retailer reported net income of $242.2 million, or $5.14 per share, compared with $249.5 million, or $5.07 per share, during the same quarter last year.
Revenues increased from $2.49 billion in the same period last year.
Comparable sales rose 0.6% year over year, as the retailer saw a slight increase in traffic and average ticket.
Customer transactions across its website and stores grew 0.5% year-over-year, and the average ticket, the amount shoppers spent during those visits, rose 0.1% year-over-year.
On the company's earnings call, Kimbell said the launch of new brands, the rollout of digital tools and in-store events helped drive Ulta's better performance in the quarter.
For example, he said, Ulta is selling an exclusive line of cosmetics tied to the release of Universal's “Wicked” movie. It has also added new online features, including virtual experience improvements and new digital buying guides. It had in-store events, including workshops where customers received training from Ulta stylists on how to get “salon-worthy hairstyles.”
For beauty retailers, including Ulta, the holidays are a critical time of year. Kimble said the company is “encouraged by our performance during Cyber Monday.”
However, he hinted at a still challenging backdrop. He said the company is prepared for the shopping season, although “our view is that economic concerns are driving a greater focus on value.”
On the earnings call, CFO Paula Oyebo said the company continues to take a “cautious view of the consumer and operating environment” and has factored that into its forecast. The compressed holiday season, with five fewer days between Thanksgiving and Christmas, could also hurt sales, she said.
Disclosure: Comcast is the parent company of NBCUniversal and CNBC. NBCUniversal is the distributor of “Wicked.”
