Ultra beauty on Thursday outlined plans to boost sales and gain market share after sales slowed in the first quarter.
Comparable sales, a metric that takes into account Ulta stores open at least 14 months along with online sales, increased 1.6% year over year, a marked slowdown from the same period a year earlier, when Ulta reported comparable sales growth of 9. 3%.
“We expect economic growth to accelerate in the second half of the year at 2% to 4%, reflecting the impact of our sales-enhancing initiatives,” Chief Financial Officer Paula Oyibo said on the company’s earnings call.
Ulta CEO Dave Kimbell warned in April at an investor conference about cooling demand in the beauty category. And while the slowdown was largely anticipated, Kimbell said it hit the company “a little earlier and a little harder” than expected.
Kimbell acknowledged Thursday that market share has been challenged in recent quarters, particularly in the high-profile cosmetics category.
“We are not satisfied with our market share trends and are taking actions to strengthen our leadership position and accelerate growth,” Kimbell said on the earnings call, adding that the company will present further long-term plans at its October analyst day.
Kimbell outlined five key areas in which the company plans to take concrete action: strengthening its assortment with 25 fresh brands, including exclusive Ulta brands with stars such as Serena Williams and Bella Hadid; increasing social relevance by scaling creator networks; improving digital consumer experiences; exploit of a loyalty program; and evolving promotional levers.
The company will also expand cooperation to include a delivery service DoorDash, where they offer same-day delivery from their stores and depend on the adoption of their application. Kimbell said the Ulta app accounted for 57% of e-commerce sales in the quarter.
Kimbell also announced that the company is testing fresh gamification platforms and will introduce fresh marketing technology later this year that will lend a hand guests personalize their shopping experience.
Ulta shares gained about 11% in extended trading Thursday.
This is how a cosmetics company made in a given period compared to Wall Street expectations, based on a survey of analysts conducted by LSEG:
- Earnings per share: $6.47 vs. expected $6.24
- Income: $2.73 billion against the expected $2.72 billion
Ulta reported net income for the quarter ended May 4 of $313.1 million, or $6.47 per share, compared with $347.1 million, or $6.88 per share, a year earlier.
Net sales rose slightly to $2.73 billion from $2.63 billion a year earlier.
The company lowered its forecast for this financial year. Ulta said it now expects net sales in the range of $11.5 billion to $11.6 billion and comparable sales in the range of 2% to 3%. Full-year net sales were previously expected to be between $11.7 billion and $11.8 billion, with comparable sales expected to be between 4% and 5%.
Ulta also revised its full-year earnings per share guidance to a range of $25.20 to $26, down from its previous forecast of $26.20 to $27.
Ulta Beauty delivered sturdy results for retailers that are grappling with the recession from consumers amid continued higher costs. Beauty brand elf recently announced its first billion-dollar fiscal year, beating Wall Street estimates and sending shares soaring.
An artificial intelligence beauty company Strange technology recently told CNBC that the industry is not seeing a slowdown, but rather a shift in business.
“We see that the industry is changing. So consumers are moving online and choosing high-performing products that really solve their problems,” Lindsay Drucker Mann, Oddity’s chief financial officer, told CNBC.
Ulta’s sentiment on Wall Street has cooled ahead of the company’s earnings report, with analysts at Baird and Canaccord Genuity lowering their price targets in recent days.
“We believe the cosmetics category is resilient. Despite reduced spending on discretionary products, consumers continue to prioritize beauty products, leading to significant growth in the category,” Jane Hali & Associates analysts said in a recent note on Ulta, adding that while they view the wellness category as a key advantage, there are careful in the makeup category.
The company’s stock closed Thursday at $385.58 per share, bringing the company’s market value to about $18.5 billion.
