Why Ulta (ULTA) Shares Are Falling Today

Anthony Lee /
2024/03/15 12:28 pm EDT

What Happened:

Shares of beauty, cosmetics, and personal care retailer Ulta Beauty (NASDAQ:ULTA) fell 7.7% in the morning session after the company reported fourth-quarter results and provided full-year revenue guidance, which was roughly in line; its full-year earnings forecast was underwhelming and missed. 

On the other hand, Ulta beat analysts' same store sales, revenue, and gross margin expectations. Its EPS also outperformed Wall Street's estimates. Zooming out, this was still a decent, albeit mixed, quarter, showing that the company is staying on track.

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What is the market telling us:

Ulta's shares are not very volatile than the market average and over the last year have had only 2 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business. 

The biggest move we wrote about over the last year was 4 months ago, when the stock gained 9.8% on the news that the company reported third quarter results with same-store sales beating convincingly, although revenue only narrowly topped expectations. Profitability was sound, leading to a nice EPS beat in the quarter. The company raised its full year outlook for important metrics such as same-store sales, revenue, and EPS. 

Finally, management commentary in the release was optimistic, citing healthy traffic trends and a good setup for the important holiday shopping season. The beauty category seems to be holding up well despite a backdrop of consumer uncertainty, fueling the argument that many beauty products are more staples-like than discretionary (consumers buy them both in good economic times and bad). 

As a reminder, when Target reported its quarterly results on November 15, 2023, the consumer bellwether also called out strength in beauty purchases. Zooming out, we think this was a solid quarter, showing that the company is staying on target.

Ulta is up 10.8% since the beginning of the year, and at $539.31 per share it is trading close to its 52-week high of $567.18 from March 2024. Investors who bought $1,000 worth of Ulta's shares 5 years ago would now be looking at an investment worth $1,594.

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