Ulta Beauty Shares sank 7% in extended trading Thursday as the company missed expectations for the second quarter and cut its full-year guidance after same-store sales fell in the most recent period.
It was the company’s first loss in earnings per share since May 2020 and the first loss in revenue since December 2020.
Comparable sales for the second quarter fell 1.2 percent, compared with an 8 percent increase a year earlier and well below the 1.2 percent 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, primarily due to a decline in comparable store sales. We are clear about the factors that negatively impacted our store performance and We have actions underway to address the trends,” CEO Dave Kimbell said in a press release.
During the company’s earnings call, Kimbell attributed the declining sales performance to four main 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 consumers who are increasingly careful with their spending and increased competition in the beauty industry. Kimbell acknowledged that Ulta’s market share is in question and said that while the company maintained its share in mass beauty during the biggest quarter, it lost share in prestige beauty due to the makeup and hair categories, according to Circana data, which cites Kimbell.
It’s not unusual 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 is unusual, adding that 80% of stores have be affected.
“We know we’re still in the midst of this…those competitive pressures will likely continue in the near future, but the positive signals…in our broader business, guest engagement, the impact of innovation, the impact of new our stores, the success of our salon business, the increase in loyalty, all of these factors indicate and give us great confidence that our business continues to have underlying strength and health,” Kimbell said.
The company now forecasts full-year same-store sales in a flat to 2% lower range, compared with previous guidance of a 2% to 3% increase.
“Our updated sales outlook assumes that it will take longer for our actions to change the path of the top line and that stores affected by multiple competitive openings will continue to be squeezed,” said CFO Paula Oyibo.
Ulta also now expects full-year revenue of $11 billion to $11.2 billion, down from its previous forecast 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.
See how the beauty retailer were carried out in the period ending August 3 compared to what Wall Street expected, based on a survey of analysts by LSEG:
- Earnings per share: $5.30 vs. $5.46 expected
- Annuity: $2.55 billion vs. $2.61 billion expected
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 same quarter last year.
Revenue rose to $2.55 billion, from $2.53 billion a year earlier.
Earlier this month, Warren Buffett’s Berkshire Hathaway revealed a $266 million stake in the beauty retailer, sending Ulta shares soaring. For some analysts, it was confirmation that the stock was oversold after falling 32% in 2024 to that point, falling 26% in the second quarter alone.
Ulta shares have been suffering since CEO Dave Kimbel warned of cooling beauty demand at an investor conference in April. Kimbell said that while a pullback was expected, it had hit the company “a little earlier and a little bigger” than expected.
During the company’s first-quarter earnings call in May, Kimbell outlined plans to boost sales that spanned five key areas: product mix, brand social relevance, enhancing the digital consumer experience, strengthening the loyalty program and leveraging promotion of the company.
On the same call, Kimbell also said that the beauty retailer later this year will expand its partnership with the delivery service DoorDashit would begin testing new gamification platforms and enable new marketing technology to personalize the customer shopping experience.
This time around, Kimbell said executives identified further opportunities in the company’s turnaround plan, including relaunching Ulta’s beauty collection and introducing new personalized product offerings for consumers online. The company also focuses on increasing the value of its rewards program through member-only events and exclusive member-level offers.
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 a previous forecast of $25.20 to $26.
