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Ulta Beauty (ULTA) Q1 Earnings & Revenues Miss Estimates
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Ulta Beauty, Inc. (ULTA - Free Report) posted dismal results for first-quarter fiscal 2020, as both top and bottom lines deteriorated year over year and fell short of the Zacks Consensus Estimate. The quarter started on a solid note with higher comparable store sales (comps), market share gains and growth in the Ultamate Rewards loyalty program until mid-March. However, the coronavirus outbreak and its rising spread considerably harmed operations.
In fact, Ulta Beauty operated as a digital-only business for most parts of the quarter. Though the company saw a higher-than-expected jump in e-commerce sales, it could not compensate for the losses from store closures.
Shares of this Zacks Rank #3 (Hold) company have dropped 6.8% in the past three months against the industry’s growth of 5.1%.
Update on COVID-19
We note that the company has been taking all steps to ensure the safety of its customers and employees amid the pandemic. In this regard, it temporarily closed all stores on Mar 19, though it kept its important online operations active. The company also furloughed many store and salon workers temporarily on Apr 19. Additionally, it is curtailing several costs and undertaking measures like suspending share buybacks and reducing store openings, among others, to protect its financial flexibility amid the pandemic.
Notably, Ulta Beauty has started reopening stores and has 333 stores open for visitors and 840 stores offering curbside pickup as of today. The company is seeing greater-than-expected sales in reopened stores. Management plans to continue reopening stores and extend services in a phased manner, per the regulatory guidelines. However, the company, which had withdrawn its fiscal 2020 guidance on Mar 17, did not offer any earnings guidance at this juncture.
Ulta Beauty Inc. Price, Consensus and EPS Surprise
Ulta Beauty posted an adjusted loss of $1.12 per share against earnings of $3.08 reported in the year-ago period. The Zacks Consensus Estimate for earnings stood at 44 cents. The dismal performance can be accountable to lower sales and margins.
Net sales of this beauty retailer slumped 32.7% year over year to $1,173.2 million and missed the Zacks Consensus Estimate of $1,199 million. Sales were hurt by coronavirus-led store closures. Comparable sales or comps (including stores temporarily closed due to the pandemic and e-commerce sales) plummeted 35.3% against 7% growth recorded in the prior-year quarter. Comps rose 4% in the preceding quarter. During the quarter, the company registered a transaction increase of 38.6%, partly made up by a rise in average ticket of 3.3%.
Gross margin collapsed from 37% to 25.9% due to fixed store cost deleverage, unfavorable channel mix shifts and deleverage of salon costs due to lower sales. This was somewhat offset by reduced promotions.
The company posted an operating loss of $101.5 million against an operating income of $237.5 million in the year-ago period. Notably, SG&A expenses (as a percentage of sales) escalated from 23.1% to 32.5% on account of a deleverage stemming from lower sales due to COVID-19. Pre-opening expenses grew 9.5% to $4.6 million.
Other Financials
Ulta Beauty, which shares space with Sally Beauty (SBH - Free Report) , ended the quarter with cash and cash equivalents of $1,043.5 million and total stockholders’ equity of approximately $1,754 million. Net merchandise inventories summed $1,340.6 million at the end of the quarter, increasing 7.2% from the year-ago period. Average inventory per store rose 1.5% year over year. Net cash used in operating activities was $24,318 million in the first quarter.
Ulta Beauty bought back 326,970 shares for $73 million in the reported quarter. The company had shares worth $1.58 billion outstanding, as of May 2, 2020, under its $1.6-billion share repurchase plan announced in March 2020. On Apr 2, the company announced that it suspended its buyback program to protect financial position amid the crisis. Moreover, the company has curtailed its capital expenditure plan and now anticipates spending $200-$210 million in this regard in fiscal 2020.
Apart from this, in the first quarter, the company drew down $800 million from its credit facility of $1 billion as a safety measure amid the pandemic.
Store Updates
During the quarter, Ulta Beauty opened 11 stores, relocated one and permanently closed another. The company ended the quarter with 1,264 stores. Owing to the current situation, management has lowered its store opening and relocation plans. It now anticipates opening 30-40 stores in fiscal 2020 alongside undertaking nearly three relocation projects. Earlier, the company expected to open about 75 stores, remodel or relocate roughly 15 and refresh nearly 42.
Tractor Supply (TSCO - Free Report) , also with a Zacks Rank #2, has a long-term earnings per share growth rate of 11.5%.
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Ulta Beauty (ULTA) Q1 Earnings & Revenues Miss Estimates
Ulta Beauty, Inc. (ULTA - Free Report) posted dismal results for first-quarter fiscal 2020, as both top and bottom lines deteriorated year over year and fell short of the Zacks Consensus Estimate. The quarter started on a solid note with higher comparable store sales (comps), market share gains and growth in the Ultamate Rewards loyalty program until mid-March. However, the coronavirus outbreak and its rising spread considerably harmed operations.
In fact, Ulta Beauty operated as a digital-only business for most parts of the quarter. Though the company saw a higher-than-expected jump in e-commerce sales, it could not compensate for the losses from store closures.
Shares of this Zacks Rank #3 (Hold) company have dropped 6.8% in the past three months against the industry’s growth of 5.1%.
Update on COVID-19
We note that the company has been taking all steps to ensure the safety of its customers and employees amid the pandemic. In this regard, it temporarily closed all stores on Mar 19, though it kept its important online operations active. The company also furloughed many store and salon workers temporarily on Apr 19. Additionally, it is curtailing several costs and undertaking measures like suspending share buybacks and reducing store openings, among others, to protect its financial flexibility amid the pandemic.
Notably, Ulta Beauty has started reopening stores and has 333 stores open for visitors and 840 stores offering curbside pickup as of today. The company is seeing greater-than-expected sales in reopened stores. Management plans to continue reopening stores and extend services in a phased manner, per the regulatory guidelines. However, the company, which had withdrawn its fiscal 2020 guidance on Mar 17, did not offer any earnings guidance at this juncture.
Ulta Beauty Inc. Price, Consensus and EPS Surprise
Ulta Beauty Inc. price-consensus-eps-surprise-chart | Ulta Beauty Inc. Quote
Q1 Numbers
Ulta Beauty posted an adjusted loss of $1.12 per share against earnings of $3.08 reported in the year-ago period. The Zacks Consensus Estimate for earnings stood at 44 cents. The dismal performance can be accountable to lower sales and margins.
Net sales of this beauty retailer slumped 32.7% year over year to $1,173.2 million and missed the Zacks Consensus Estimate of $1,199 million. Sales were hurt by coronavirus-led store closures. Comparable sales or comps (including stores temporarily closed due to the pandemic and e-commerce sales) plummeted 35.3% against 7% growth recorded in the prior-year quarter. Comps rose 4% in the preceding quarter. During the quarter, the company registered a transaction increase of 38.6%, partly made up by a rise in average ticket of 3.3%.
Gross margin collapsed from 37% to 25.9% due to fixed store cost deleverage, unfavorable channel mix shifts and deleverage of salon costs due to lower sales. This was somewhat offset by reduced promotions.
The company posted an operating loss of $101.5 million against an operating income of $237.5 million in the year-ago period. Notably, SG&A expenses (as a percentage of sales) escalated from 23.1% to 32.5% on account of a deleverage stemming from lower sales due to COVID-19. Pre-opening expenses grew 9.5% to $4.6 million.
Other Financials
Ulta Beauty, which shares space with Sally Beauty (SBH - Free Report) , ended the quarter with cash and cash equivalents of $1,043.5 million and total stockholders’ equity of approximately $1,754 million. Net merchandise inventories summed $1,340.6 million at the end of the quarter, increasing 7.2% from the year-ago period. Average inventory per store rose 1.5% year over year. Net cash used in operating activities was $24,318 million in the first quarter.
Ulta Beauty bought back 326,970 shares for $73 million in the reported quarter. The company had shares worth $1.58 billion outstanding, as of May 2, 2020, under its $1.6-billion share repurchase plan announced in March 2020. On Apr 2, the company announced that it suspended its buyback program to protect financial position amid the crisis. Moreover, the company has curtailed its capital expenditure plan and now anticipates spending $200-$210 million in this regard in fiscal 2020.
Apart from this, in the first quarter, the company drew down $800 million from its credit facility of $1 billion as a safety measure amid the pandemic.
Store Updates
During the quarter, Ulta Beauty opened 11 stores, relocated one and permanently closed another. The company ended the quarter with 1,264 stores. Owing to the current situation, management has lowered its store opening and relocation plans. It now anticipates opening 30-40 stores in fiscal 2020 alongside undertaking nearly three relocation projects. Earlier, the company expected to open about 75 stores, remodel or relocate roughly 15 and refresh nearly 42.
Check These Solid Picks
Office Depot (ODP - Free Report) , with a Zacks Rank #2 (Buy), has an impressive earnings surprise record. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Tractor Supply (TSCO - Free Report) , also with a Zacks Rank #2, has a long-term earnings per share growth rate of 11.5%.
The Hottest Tech Mega-Trend of All
Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce ""the world's first trillionaires,"" but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>