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Ulta Beauty (ULTA) to Post Q3 Earnings: What's in the Offing?
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Ulta Beauty, Inc. (ULTA - Free Report) is likely to witness a decline in top and bottom lines when it releases third-quarter fiscal 2020 numbers on Dec 3. While the Zacks Consensus Estimate for earnings has increased 2.1% over the past 30 days to $1.46 per share, suggesting a slump of 35.1% from earnings of $2.25 reported in the prior-year period. Notably, Ulta Beauty’s bottom line surpassed the Zacks Consensus Estimate by a significant margin in the last reported quarter. Also, this beauty retailer has a trailing four-quarter earnings surprise of roughly 71%, on average.
The Zacks Consensus Estimate for revenues is pegged at $1,537 million, indicating a decline of 8.7% from the prior-year quarter’s reported figure.
Ulta Beauty’s soft comparable sales or comps (including stores temporarily closed due to the pandemic and e-commerce sales) have been a concern amid the pandemic. In the first three weeks of August, comps were down in mid-single digits. On its second-quarter conference call, management said that it expects the full recovery to pre-pandemic levels to take some time. Management then anticipated sluggish demand for the rest of the year, as it expected the pandemic-related hurdles to continue and the near-term landscape to remain dynamic and troubled. These factors raise concerns over the quarter under review.
Further, the company notified that it was reducing its promotional activity, which may have affected comps. Additionally, management on its earnings call said that it expected sluggish holiday season traffic on account of coronavirus-related health and social-distancing concerns among customers, limited store capacity and the company’s decision to keep stores closed on Thanksgiving Day this year. Given all the above-mentioned factors, Ulta Beauty expects a low-double-digit to mid-teens-range decline in comps for the second half of fiscal 2020. Apart from this, Ulta Beauty is likely to have shut down 19 stores in the third quarter.
Moreover, the company’s makeup category has been under pressure due to consumers’ changing behavior as well as restricted innovation in categories. Delayed innovation along with reduced makeup usage due to the pandemic-led social distancing and fewer outings is likely to have kept the makeup category growth troubled. Nonetheless, the skincare category has been doing well and is likely to have benefited from consumers’ increased focus on skincare and hair amid higher at-home grooming. Additionally, the company’s e-commerce operations have been strong amid the pandemic, on the back of solid curbside pickup and buy online pickup in store services.
Certainly, Ulta Beauty’s focus on its five strategic priorities bodes well. The company’s foremost priority is to strengthen its omnichannel business and explore the potential of both physical and digital facets. Next, the company has been undertaking various tools to enhance the experience of guests, like offering a virtual try-on tool and in-store education, and reimagining fixtures, among others. Further, the company concentrates on offering customers a curated and exclusive range of beauty products through innovation. It is also focused on fueling innovation at its Ultamate Rewards program in several ways. Finally, management is committed to optimizing its cost structure.
We note that the company has been seeing high COVID-19-related costs. Management expects costs in the range of $35-$40 million in the second half of fiscal 2020 toward PPE and expenses related to COVID-19.
What the Zacks Model Unveils
Our proven model doesn’t conclusively predict an earnings beat for Ulta Beauty this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Here are some companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this season.
Kroger (KR - Free Report) has an Earnings ESP of +0.38% and a Zacks Rank #2, currently.
Casey's General Stores (CASY - Free Report) ) has an Earnings ESP of +1.49% and a Zacks Rank #3, at present.
Bed Bath & Beyond has an Earnings ESP of +11.77% and currently, a Zacks Rank of 3.
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 >>
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Ulta Beauty (ULTA) to Post Q3 Earnings: What's in the Offing?
Ulta Beauty, Inc. (ULTA - Free Report) is likely to witness a decline in top and bottom lines when it releases third-quarter fiscal 2020 numbers on Dec 3. While the Zacks Consensus Estimate for earnings has increased 2.1% over the past 30 days to $1.46 per share, suggesting a slump of 35.1% from earnings of $2.25 reported in the prior-year period. Notably, Ulta Beauty’s bottom line surpassed the Zacks Consensus Estimate by a significant margin in the last reported quarter. Also, this beauty retailer has a trailing four-quarter earnings surprise of roughly 71%, on average.
The Zacks Consensus Estimate for revenues is pegged at $1,537 million, indicating a decline of 8.7% from the prior-year quarter’s reported figure.
Ulta Beauty Inc. Price and EPS Surprise
Ulta Beauty Inc. price-eps-surprise | Ulta Beauty Inc. Quote
Key Factors to Note
Ulta Beauty’s soft comparable sales or comps (including stores temporarily closed due to the pandemic and e-commerce sales) have been a concern amid the pandemic. In the first three weeks of August, comps were down in mid-single digits. On its second-quarter conference call, management said that it expects the full recovery to pre-pandemic levels to take some time. Management then anticipated sluggish demand for the rest of the year, as it expected the pandemic-related hurdles to continue and the near-term landscape to remain dynamic and troubled. These factors raise concerns over the quarter under review.
Further, the company notified that it was reducing its promotional activity, which may have affected comps. Additionally, management on its earnings call said that it expected sluggish holiday season traffic on account of coronavirus-related health and social-distancing concerns among customers, limited store capacity and the company’s decision to keep stores closed on Thanksgiving Day this year. Given all the above-mentioned factors, Ulta Beauty expects a low-double-digit to mid-teens-range decline in comps for the second half of fiscal 2020. Apart from this, Ulta Beauty is likely to have shut down 19 stores in the third quarter.
Moreover, the company’s makeup category has been under pressure due to consumers’ changing behavior as well as restricted innovation in categories. Delayed innovation along with reduced makeup usage due to the pandemic-led social distancing and fewer outings is likely to have kept the makeup category growth troubled. Nonetheless, the skincare category has been doing well and is likely to have benefited from consumers’ increased focus on skincare and hair amid higher at-home grooming. Additionally, the company’s e-commerce operations have been strong amid the pandemic, on the back of solid curbside pickup and buy online pickup in store services.
Certainly, Ulta Beauty’s focus on its five strategic priorities bodes well. The company’s foremost priority is to strengthen its omnichannel business and explore the potential of both physical and digital facets. Next, the company has been undertaking various tools to enhance the experience of guests, like offering a virtual try-on tool and in-store education, and reimagining fixtures, among others. Further, the company concentrates on offering customers a curated and exclusive range of beauty products through innovation. It is also focused on fueling innovation at its Ultamate Rewards program in several ways. Finally, management is committed to optimizing its cost structure.
We note that the company has been seeing high COVID-19-related costs. Management expects costs in the range of $35-$40 million in the second half of fiscal 2020 toward PPE and expenses related to COVID-19.
What the Zacks Model Unveils
Our proven model doesn’t conclusively predict an earnings beat for Ulta Beauty this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Ulta Beauty currently has a Zacks Rank #3 and an Earnings ESP of -8.83%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Stocks With Favorable Combinations
Here are some companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this season.
Kroger (KR - Free Report) has an Earnings ESP of +0.38% and a Zacks Rank #2, currently.
Casey's General Stores (CASY - Free Report) ) has an Earnings ESP of +1.49% and a Zacks Rank #3, at present.
Bed Bath & Beyond has an Earnings ESP of +11.77% and currently, a Zacks Rank of 3.
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 >>