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Ulta Beauty (ULTA) Up More Than 10% in 3 Months: Here's Why

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Ulta Beauty, Inc. (ULTA - Free Report) appears to be in solid shape, with its shares up 12.1% in the past three months against the industry’s decline of 11.7%. The company has been benefiting from its strong omnichannel operations and an impressive skincare category. The impact of these upsides was visible in the beauty retailer’s first-quarter fiscal 2022 results, wherein the top and bottom lines advanced year over year and surpassed the Zacks Consensus Estimate. Also, management raised its guidance for fiscal 2022.

The Zacks Consensus Estimate for the current fiscal-year earnings per share (EPS) has jumped from $18.58 to $20.07 over the past 30 days. Let’s delve deeper into the factors backing this Zacks Rank #1 (Strong Buy) company, which flaunts a long-term EPS growth rate of 10.7%.

Ulta Beauty Inc. Price, Consensus and EPS Surprise Ulta Beauty Inc. Price, Consensus and EPS Surprise

Ulta Beauty Inc. price-consensus-eps-surprise-chart | Ulta Beauty Inc. Quote

Solid Omnichannel Operations & Skincare Category

Ulta Beauty has been enriching its omnichannel experience through launches like Beauty to Go, options like same-day delivery (in some stores) and unique salon services across stores, among others. In the first quarter of fiscal 2022, the company opened 26 Ulta Beauty at Target shops and ended the quarter with 127 locations. Apart from this, ULTA is benefiting from its Wellness Shop launch (in the fourth quarter of fiscal 2021), which is a cross-category platform providing guests with self-care for the mind, body and spirit across several stores and online. On its first-quarter earnings call, management stated that its Wellness Shop reached nearly 55% of its store fleet. The company’s buy online, pick up in store (BOPIS) continued to gain traction in the first quarter. BOPIS sales rose 26% and contributed 21% to e-commerce sales.

Ulta Beauty has been seeing market share gains in major beauty categories for a while now, with skincare standing out due to consumers’ rising interest in self-care and the company’s focus on newness and innovation. The trend continued in the first quarter of fiscal 2022, wherein skincare comparable sales (comps) saw strong double-digit growth. The category growth was backed by moisturizers, acne treatments and eye serums. Guests’ increased focus on self-care and maintaining healthy skincare routines works well for this category. Apart from these, the company has been seeing strength in the fragrance and haircare category, with product newness being a solid driver. Even the makeup category is on track for full recovery.

Robust Q1 Results & Raised Guidance

First-quarter fiscal 2022 results were backed by the strong execution of the company’s strategies and solid guest demand, with the latter gaining from the company’s exciting brand launches. Also, increased in-person activities and travel have been leading to the revival of the beauty category demand. While lower than pre-pandemic levels, store traffic is improving. That said, digital trends have also been impressive. All of Ulta Beauty’s major categories, including hair care, fragrance and bath, skincare and makeup, delivered double-digit growth in comps.

Net sales surged 21% year over year to $2,345.9 million and beat the Zacks Consensus Estimate of $2,135 million. The uptick can be attributed to reduced pandemic-induced restrictions. Comps jumped 18%, driven by a 10% improvement in transactions along with a 7.3% increase in the average ticket. Transactions gained on a double-digit rise in store transactions and the average ticket increased on a rise in the average selling price. Solid sales and the company’s ongoing cost-optimization efforts aided the bottom line. Ulta Beauty posted an EPS of $6.30, which beat the Zacks Consensus Estimate of $4.44. In the first quarter of fiscal 2021, the adjusted EPS amounted to $4.10.
 

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Due to a solid first-quarter show and sales trends witnessed in the second quarter so far, management raised its guidance for fiscal 2022. It now expects fiscal 2022 net sales in the range of $9.35-$9.55 billion compared with the $9.05-$9.15 billion range expected earlier. Comps are expected to rise in the range of 6-8% now compared with the earlier view of 3-4%. Comps are likely to be in the low-to-mid-teens range in the first half and moderate to a low-single-digit rise in the second half. Management now expects the operating margin between 14.1% and 14.4%, which was earlier expected between 13.7% and 14%. For fiscal 2022, earnings are envisioned in the range of $19.20-$20.10 per share now, up from the $18.2-$18.7 per share range expected before.

Hence, Ulta Beauty is set to continue with its stellar performance.

Other Retail Stocks to Bet on

Here are some other top-ranked stocks – Dillard's, Inc. (DDS - Free Report) , MarineMax (HZO - Free Report) and The Kroger Co. (KR - Free Report) .

Dillard's, which operates retail department stores, sports a Zacks Rank #1. The company has a trailing four-quarter earnings surprise of 224.1%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Dillard's current financial-year sales suggests growth of 6.1% from the year-ago period. DDS has an expected EPS growth rate of 14.6% for three to five years.

MarineMax, a recreational boat and yacht retailer and a superyacht services company, sports a Zacks Rank #1. MarineMax has a trailing four-quarter earnings surprise of 32.8%, on average.

The Zacks Consensus Estimate for HZO’s current financial-year sales suggests growth of 16% from the year-ago period.

Kroger, a renowned supermarket company, carries a Zacks Rank #2 (Buy). The company has an expected EPS growth rate of 9.9% for three to five years.

The Zacks Consensus Estimate for Kroger’s current financial-year sales suggests growth of 3.2% from the year-ago period. KR has a trailing four-quarter earnings surprise of 22.1%, on average.


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Dillard's, Inc. (DDS) - free report >>

The Kroger Co. (KR) - free report >>

Ulta Beauty Inc. (ULTA) - free report >>

MarineMax, Inc. (HZO) - free report >>