‘s stock was falling sharply Friday after the beauty retailer cut operating margin expectations and warned investors of moderating growth.
Ulta (ticker: ULTA) on Thursday reported earnings of $6.88 a share in the first fiscal quarter that ended in April, narrowly beating estimates of $6.82.
But same-store sales, which measure revenue online and at stores open for at least 14 months, gained 9.3%, slightly below estimates of 9.4%. The average ticket, or sales per customer, also declined 1.5% in the quarter from a year ago. That was its first decline in more than five years, according to
analyst Ike Boruchow.
Consumers have been pulling back on purchases in the face of high inflation and fears about recession.
), catering partly to lower-income consumers, have forecast their sales will slow.
Ulta CEO David Kimbell on Thursday said while the importance of overall skin care and wellness was expected to continue coming out of the pandemic, the high level of growth the company has seen in these last two years will moderate and ultimately get back to the high end of the historical average.
Ulta, much like
(DG), also is facing issues from shrinkage to theft and loss of items. The operating margin for the fiscal year was lowered to between 14.5% and 14.8% compared with a prior projection of 14.7% to 15
Ulta slumped 12% to $427.58, making the stock the
‘s worst performer on Friday. It’s on pace for the largest percent decrease since March 2020, according to Dow Jones Market Data. Ulta was a Barron’s stock pick in February.
Ulta’s stock now trades at 18.9 times its next 12 months’ earnings, nearly matching the S&P 500, which trades at 18 times but cheaper relative to its own five-year historical average of 23 times.
Wells Fargo’s Boruchow recommends selling the stock. He reiterated his Underweight rating after the earnings report and said “we’ve hit a speed bump,” referring to the slowdown after Ulta’s years of rapid growth spurred by demand for beauty and its own rewards program. The analyst cut his price target to $350 from $400.
J.P. Morgan analyst Christopher Horvers stuck with his Overweight rating. He agrees that Ulta isn’t immune to weakening consumer spending but is more resilient partly due to its position as the only national beauty retailer to offer prestige and mass beauty products as well as hair care brands. Horvers trimmed his target to $545 from $575, still implying a roughly 25% gain from current levels.
Most analysts side with Horvers, with 54% out of the 28 analysts tracking the stock rating it at Buy or equivalent.
Write to Karishma Vanjani at firstname.lastname@example.org.
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