Cosmetics leader Ulta Beauty (ULTA) eked out a top- and bottom-line earnings beat for the fiscal fourth quarter, but its guidance for the coming year fell short of estimates as a cautious consumer delays return to growth.
CEO Kecia Steelman says “it will take time to see the impact” of the investments it’s making in its growth initiatives, but she is confident they will restart the growth cycle for Ulta.
The beauty retailer generated almost $3.5 billion in revenue in the fourth quarter, down slightly from the year ago period. However, the prior year’s quarter had an extra week of sales of approximately $182 million. On a similar-sales basis, Ulta slightly beat the year-ago period’s results.
While profits were strong, Ulta lost market share in the beauty category for the first time last year. Competition in the prestige category has grown more intense and consumers, concerned about inflation and the economy, have more options available for where they buy their cosmetics.
Beyond traditional competitors like LVMH Moet Hennessy Louis Vuitton’s (LVMUY) Sephora, Walmart (WMT) and Amazon (AMZN) are now serious rivals in the space. e.l.f. Beauty (ELF) said last month during its own earnings conference call that sales through Ulta have seen “a little bit of softness.”
It was Ulta’s full-year guidance, though, that was disappointing. It forecasts $11.5 billion to $11.6 billion in sales, up 2% from this year, but below Wall Street’s expectations of $11.67 billion. Earnings of $22.70 per share at the midpoint of its range was also below analyst forecasts of $23.52 per share.
Steelman calls 2025 a “pivotal year” for the beauty retailer as it invests more in its brand, customer personalization, and accelerating its digital presence. Investors may have to wait a bit for them to pay off before they see momentum swing Ulta’s way again.
Despite this, shares of ULTA stock are up more than 7% in premarket trading.
