What Happened:
Shares of beauty, cosmetics, and personal care retailer Ulta Beauty (NASDAQ:ULTA) fell 14.6% in the afternoon session after the company warned about cooling demand for beauty products at a J.P. Morgan conference. CEO Dave Kimbell added "We have seen a slowdown in the total category...We came into the year — and we talked about this on our [earnings] call a few weeks ago — expecting the category to moderate. It has [had], as I said, several years of strong growth. We did not anticipate it would continue at the rate that it's been growing."
Ulta Beauty also expects comparable sales for the first quarter of the year to come in at the lower end of the first-half guidance for low single-digit growth provided during the Q4'2023 earnings call. Given the healthy growth reported in recent quarters, management anticipated some moderation heading into 2024.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Ulta? Access our full analysis report here, it's free.
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 3 moves greater than 5%. Moves this big are very rare for Ulta and that is indicating to us that this news had a significant impact on the market's perception of the business.
The previous big move we wrote about was 19 days ago, when the stock dropped 7.7% on the news that 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.
Ulta is down 8.7% since the beginning of the year, and at $443.94 per share it is trading 21.7% below 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 $1,268.
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