Ulta Beauty Shares fell 7% in extended trading Thursday as the company missed second-quarter expectations and cut its full-year guidance after a decline in same-store sales during the most recent period.
It was the first time the company missed earnings per share since May 2020 and the first time it missed revenue gains since December 2020.
Second-quarter comparable sales fell 1.2%, compared with an 8% increase a year earlier and well below the 1.2% growth expected by Wall Street analysts, according to StreetAccount.
“While we are encouraged by many positive indicators across our business, our second quarter performance fell short of our expectations, driven primarily by a decline in comparable store sales. We are clear about the factors that negatively impacted our store performance and are taking steps to address the trends,” CEO Dave Kimbell said in a press release.
During the company's earnings conference call, Kimbell attributed the decline in sales performance to four key factors, including an “unforeseen operational disruption” due to a change in store systems, as well as a disappointing impact from promotions.
The company also suffered from what Kimbell described as increasingly cautious consumers and heightened competition in the beauty industry. Kimbell admitted that Ulta’s market share is being challenged, saying that while the company maintained its share in mass beauty for most of the quarter, it lost share in the prestige beauty sector driven by the makeup and hair categories, according to data from Circana, cited by Kimbell.
It’s not uncommon for stores to experience a short-term negative impact on sales due to competitor openings or cannibalization by new Ulta beauty stores, but Kimbell said the scale and pace of change now has been unusual, adding that 80% of stores have been affected.
“We know we're still in the midst of this… these competitive pressures will likely continue in the near term, but the positive signs… in our overall business, customer 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 suggest to 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 or even decline 2%, compared with prior guidance of 2% to 3% growth.
“Our updated sales outlook assumes it will take longer for our actions to turn the revenue trajectory around and that stores impacted by multiple competitive openings will continue to be under pressure,” said Chief Financial Officer Paula Oyibo.
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 a previous forecast of $25.20 to $26.
Here's how the beauty retailer performed in the period ended Aug. 3 compared with what Wall Street expected, according to a survey of analysts by LSEG:
- Earnings per share: $5.30 vs. $5.46 expected
- Revenue: $2.55 billion versus the expected $2.61 billion
The company reported net income of $252.6 million, or $5.30 per share, compared with $300.1 million, or $6.02 per share, in the year-ago quarter.
Revenue rose to $2.55 billion from $2.53 billion a year earlier.
Earlier this month, Warren Buffet’s Berkshire Hathaway disclosed a $266 million stake in the beauty retail chain, sending Ulta’s stock soaring. For some analysts, it was validation that the stock was oversold after being down 32% in 2024 to that point, dropping 26% in the second quarter alone.
Ulta's stock has suffered since Chief Executive Dave Kimbell warned of cooling demand for beauty products at an investor conference in April. Kimbell said that while a pullback was expected, it had hit the company “a little bit earlier and a little bit harder” than anticipated.
During the company’s first-quarter earnings conference call in May, Kimbell outlined plans to boost sales that spanned five key areas: product assortment, brand social relevance, enhancing the digital consumer experience, driving the loyalty program and evolving the company’s promotional levers.
On the same call, Kimbell also said the beauty retailer would expand its partnership with the delivery service later this year. Dash Doorwould begin testing new gamification platforms and activate new marketing technologies to personalize the customer shopping experience.
This time around, Kimbell said executives have identified more opportunities within the turnaround plan, such as relaunching Ulta’s own beauty collection and introducing new personalized product recommendations for online consumers. The company is also focusing on increasing the value of the rewards program through member-exclusive events and tiered offerings.
Clarification: This story has been updated to clarify that Ulta Beauty forecast full-year earnings per share of $22.60 to $23.50, down from the prior forecast of $25.20 to $26.
