Ulta Beauty (ULTA) Q4 2022 Quarterly Earnings

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Kylie’s beauty show at the ULTA store in New York.

Scott Mlyn | CNBC

Ulta Beauty topped Wall Street expectations for earnings and holiday season revenue, as shoppers continued to save room in their tighter budgets for beauty products during the holiday season celebration

The holiday season meant that more people were buying beauty products to prepare for parties and to use as gifts. “We describe it as ‘gifting and glamming,'” CEO Dave Kimbell told CNBC.

The affordable luxury of the beauty sector has made it a major spending segment, even as inflation shrinks consumer wallets and makes necessities like groceries more expensive. Kimbell said that consumer spending across income levels remained strong in the fourth quarter and that consumers are not trading down to cheaper options, despite higher prices on the company’s products.

Same-store sales grew 15.6% in the fourth quarter, slower growth than the 21.4% jump it posted in the same quarter last year, but well above analysts’ estimates of 8.4%, according to StreetAccount .

Kimbell said there were double-digit sales increases in the fourth quarter of makeup, hair care, skin care and fragrance products. He said the wellness sector, which includes items such as nutritional supplements and silk pillowcases, is also growing after the pandemic has put a new emphasis on self-care.

As a percentage of net sales, gross profit remained flat compared to the prior quarter due in part to higher inventory shrinkage. Kimbell cited organized retail crime as a major reason for the decline, which he said is a “challenge throughout retail.” “

Here’s how the company did in the fourth quarter, ended Jan. 28, compared to Refinitiv consensus estimates:

  • Earnings per share: $6.68 versus $5.68 calculated
  • Income: $3.23 billion vs $3.03 billion estimated

Net income rose 17.8% year over year to $340.8 million, or $6.68 per share, from $289.4 million, or $5.41 per share, in the fourth quarter of 2021.

Looking ahead, the company expects full-year revenue for 2023 to be between $10.95 billion and $11.05 billion along with earnings per share between $24.70 and $25.40. Wall Street expected 2023 revenue of $10.74 billion and earnings per share of $24.25, according to Refinitiv.

Ulta expects most of that growth to come in the first half of 2023 and some of it in the back half. Kimbell said that while higher prices won’t necessarily come down, the company plans to moderate the rate of its price increases.

The company is also working on expanding its footprint. It opened 12 new stores in the fourth quarter and is shooting for between 25 and 30 new locations in 2023. The ultimate goal is to open about 100 new stores in the next two years, Kimbell told CNBC .

Ulta is also looking to continue building on the partnership with him Target. Ulta grocery stores are currently in 350 Target locations nationwide, and Kimbell said the company is on track to have up to 450 more over time.

Along with brick-and-mortar, the makeup retailer wants to strengthen its digital footprint. Kimbell said the company is in the final stages of the “digital store of the future,” an effort to revamp its e-commerce platforms.

As of the market close Thursday, Ulta shares are up about 11% this year, outpacing the S&P 500, which is up about 2% year to date.

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