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Ulta Beauty (ULTA) Stock Up on Q2 Earnings Beat, Raised View
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Ulta Beauty, Inc. (ULTA - Free Report) raises its guidance for fiscal 2022 on posting robust second-quarter fiscal 2022 results, with the top and the bottom line beating the Zacks Consensus Estimate and increasing year over year. Shares of the company rallied 3.1% during the after-market trading session on Aug 25.
Results gained from solid consumer demand and broad-based momentum across its business. The company generated double-digit comparable sales growth in all major categories while improving profitability. It witnessed increased market share in prestige beauty. Management noted that consumer engagement with beauty remains solid, courtesy of the continued importance of self-care and wellness and a deep emotional connection with the category.
This Zacks Rank #2 (Buy) stock has gained 10.9% in the past three months compared with the industry’s 6.2% growth.
Ulta Beauty Inc. Price, Consensus and EPS Surprise
Ulta Beauty posted earnings per share (EPS) of $5.70, which beat the Zacks Consensus Estimate of $4.96. In the second quarter of fiscal 2021, the adjusted EPS amounted to $4.56.
Net sales of this beauty products retailer surged 16.8% year over year to $2,297.1 million and beat the Zacks Consensus Estimate of $2,211.7 million. The uptick can be attributed to the positive impact of the ongoing resilience of the beauty division as well as gains from new brands and product innovation. The easing of COVID-19 restrictions relative to the year-ago quarter also contributed to the upside.
Comps jumped 14.4%, driven by an 8.3% improvement in transactions and a 5.6% increase in the average ticket. Transactions in the quarter gained on growth across stores while average ticket benefited from a higher average selling price.
The gross profit increased 16.3% to $928.2 million. Gross profit, as a percentage of net sales, came in at 40.4%, down from 40.6% reported in the year-ago quarter. The downside can mainly be attributed to reduced merchandise margin and increased inventory shrink. These were somewhat offset by leverage of fixed costs and solid growth in other revenue.
Selling, general and administrative (SG&A) expenses rose 15.1% to $534.5 million. As a percentage of net sales, SG&A expenses stood at 23.3%, down from 23.6% reported in the year-ago quarter, led by reduced marketing expenses and leverage of store payroll, benefits and store expenses owing to increased sales. These were somewhat countered by deleveraging in corporate overhead, among others.
The operating income came in at $391.4 million. The operating margin was 17%. In the second quarter of fiscal 2021, ULTA posted an operating income of $332.3 million, with the operating margin at 16.9%.
Other Updates
Ulta Beauty ended the quarter with cash and cash equivalents of $434.2 million. Net merchandise inventories came in at $1.67 billion at the end of the second quarter of fiscal 2022. Stockholders’ equity at the end of the quarter stood at $1,769.1 million. Net cash provided by operating activities was $540.7 million in the 26 weeks ended Jul 30, 2022.
The company repurchased 797,994 shares for $301.6 million in the second quarter. As of Jul 30, 2022, Ulta Beauty had shares worth $1.6 billion left under its buyback program announced in March 2022.
For fiscal 2022, capital expenditures are expected in the band of $350-$400 million.
During the reported quarter, the company introduced seven new stores along with relocating four. Ulta Beauty ended the quarter with 1,325 stores.
For fiscal 2022, ULTA expects 50 net new stores along with 35 store remodeling and relocation projects.
Image Source: Zacks Investment Research
Guidance
Taking into account the second quarter performance and sales trends witnessed till August, management is increasing its fiscal 2022 outlook.
Ulta Beauty now expects fiscal 2022 net sales in the range of $9.65-$9.75 billion compared with the $9.35-$9.55 billion range expected earlier. Comps are expected to rise in the range of 9.5-10.5% now compared with the earlier view of 6-8%.
The company projects mid-single-digit comp growth in the back half of fiscal 2022, reflecting the potential risk of a shift in consumer spending owing to inflationary pressures. The forecast also projects the impact of higher distribution points for prestige beauty and a more promotional holiday season.
Management now expects the operating margin to be between 14.6% and 14.8%, which was earlier expected between 14.1% and 14.4%. The company anticipates seeing operating margin deleverage in the second half of the year as sales growth moderates with cost pressures and planned investments having a bigger impact. Further, ULTA envisions gross margin expansion for fiscal 2022 fueled by fixed costs leverage and growth in other revenue. These factors will somewhat be offset by reduced merchandise margin, higher shrink and escalated supply chain costs. Management expects to keep seeing inflationary pressure in operating expenses.
For fiscal 2022, earnings are envisioned in the range of $20.70-$21.20 per share now, up from the $19.20-$20.10 per share range expected before.
The Zacks Consensus Estimate for Dollar General’s current financialyear revenues and EPS suggests growth of 10.1% and 13.7%, respectively, from the year-ago reported figure. Dollar General has a trailing four-quarter earnings surprise of 2.8%, on average.
Costco, which is engaged in the operation of membership warehouses, carries a Zacks Rank #2. COST has an expected EPS growth rate of 9.2% for three to five years.
The Zacks Consensus Estimate for Costco’s current financialyear sales and EPS suggests growth of 15.4% and 18.2%, respectively, from the year-ago period. COST has a trailing four-quarter earnings surprise of 9.7%, on average.
Dollar Tree operates a discount variety retail stores. The stock currently carries a Zacks Rank #2. DLTR has an expected EPS growth rate of 15.5% for three to five years.
The Zacks Consensus Estimate for Dollar Tree’s current financialyear revenues and EPS suggests growth of 6.7% and 40.9%, respectively, from the year-ago reported figure. DLTR has a trailing four-quarter earnings surprise of 13.1%, on average.
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Ulta Beauty (ULTA) Stock Up on Q2 Earnings Beat, Raised View
Ulta Beauty, Inc. (ULTA - Free Report) raises its guidance for fiscal 2022 on posting robust second-quarter fiscal 2022 results, with the top and the bottom line beating the Zacks Consensus Estimate and increasing year over year. Shares of the company rallied 3.1% during the after-market trading session on Aug 25.
Results gained from solid consumer demand and broad-based momentum across its business. The company generated double-digit comparable sales growth in all major categories while improving profitability. It witnessed increased market share in prestige beauty. Management noted that consumer engagement with beauty remains solid, courtesy of the continued importance of self-care and wellness and a deep emotional connection with the category.
This Zacks Rank #2 (Buy) stock has gained 10.9% in the past three months compared with the industry’s 6.2% growth.
Ulta Beauty Inc. Price, Consensus and EPS Surprise
Ulta Beauty Inc. price-consensus-eps-surprise-chart | Ulta Beauty Inc. Quote
Quarterly Numbers
Ulta Beauty posted earnings per share (EPS) of $5.70, which beat the Zacks Consensus Estimate of $4.96. In the second quarter of fiscal 2021, the adjusted EPS amounted to $4.56.
Net sales of this beauty products retailer surged 16.8% year over year to $2,297.1 million and beat the Zacks Consensus Estimate of $2,211.7 million. The uptick can be attributed to the positive impact of the ongoing resilience of the beauty division as well as gains from new brands and product innovation. The easing of COVID-19 restrictions relative to the year-ago quarter also contributed to the upside.
Comps jumped 14.4%, driven by an 8.3% improvement in transactions and a 5.6% increase in the average ticket. Transactions in the quarter gained on growth across stores while average ticket benefited from a higher average selling price.
The gross profit increased 16.3% to $928.2 million. Gross profit, as a percentage of net sales, came in at 40.4%, down from 40.6% reported in the year-ago quarter. The downside can mainly be attributed to reduced merchandise margin and increased inventory shrink. These were somewhat offset by leverage of fixed costs and solid growth in other revenue.
Selling, general and administrative (SG&A) expenses rose 15.1% to $534.5 million. As a percentage of net sales, SG&A expenses stood at 23.3%, down from 23.6% reported in the year-ago quarter, led by reduced marketing expenses and leverage of store payroll, benefits and store expenses owing to increased sales. These were somewhat countered by deleveraging in corporate overhead, among others.
The operating income came in at $391.4 million. The operating margin was 17%. In the second quarter of fiscal 2021, ULTA posted an operating income of $332.3 million, with the operating margin at 16.9%.
Other Updates
Ulta Beauty ended the quarter with cash and cash equivalents of $434.2 million. Net merchandise inventories came in at $1.67 billion at the end of the second quarter of fiscal 2022. Stockholders’ equity at the end of the quarter stood at $1,769.1 million. Net cash provided by operating activities was $540.7 million in the 26 weeks ended Jul 30, 2022.
The company repurchased 797,994 shares for $301.6 million in the second quarter. As of Jul 30, 2022, Ulta Beauty had shares worth $1.6 billion left under its buyback program announced in March 2022.
For fiscal 2022, capital expenditures are expected in the band of $350-$400 million.
During the reported quarter, the company introduced seven new stores along with relocating four. Ulta Beauty ended the quarter with 1,325 stores.
For fiscal 2022, ULTA expects 50 net new stores along with 35 store remodeling and relocation projects.
Image Source: Zacks Investment Research
Guidance
Taking into account the second quarter performance and sales trends witnessed till August, management is increasing its fiscal 2022 outlook.
Ulta Beauty now expects fiscal 2022 net sales in the range of $9.65-$9.75 billion compared with the $9.35-$9.55 billion range expected earlier. Comps are expected to rise in the range of 9.5-10.5% now compared with the earlier view of 6-8%.
The company projects mid-single-digit comp growth in the back half of fiscal 2022, reflecting the potential risk of a shift in consumer spending owing to inflationary pressures. The forecast also projects the impact of higher distribution points for prestige beauty and a more promotional holiday season.
Management now expects the operating margin to be between 14.6% and 14.8%, which was earlier expected between 14.1% and 14.4%. The company anticipates seeing operating margin deleverage in the second half of the year as sales growth moderates with cost pressures and planned investments having a bigger impact. Further, ULTA envisions gross margin expansion for fiscal 2022 fueled by fixed costs leverage and growth in other revenue. These factors will somewhat be offset by reduced merchandise margin, higher shrink and escalated supply chain costs. Management expects to keep seeing inflationary pressure in operating expenses.
For fiscal 2022, earnings are envisioned in the range of $20.70-$21.20 per share now, up from the $19.20-$20.10 per share range expected before.
3 Other Top Retail Stocks
Here we have highlighted three other top-ranked stocks, namely Dollar General (DG - Free Report) , Costco (COST - Free Report) and Dollar Tree (DLTR - Free Report) .
Dollar General, a discount retailer, currently carries a Zacks Rank #2. DG has an expected EPS growth rate of 12.8% for three to five years. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Dollar General’s current financialyear revenues and EPS suggests growth of 10.1% and 13.7%, respectively, from the year-ago reported figure. Dollar General has a trailing four-quarter earnings surprise of 2.8%, on average.
Costco, which is engaged in the operation of membership warehouses, carries a Zacks Rank #2. COST has an expected EPS growth rate of 9.2% for three to five years.
The Zacks Consensus Estimate for Costco’s current financialyear sales and EPS suggests growth of 15.4% and 18.2%, respectively, from the year-ago period. COST has a trailing four-quarter earnings surprise of 9.7%, on average.
Dollar Tree operates a discount variety retail stores. The stock currently carries a Zacks Rank #2. DLTR has an expected EPS growth rate of 15.5% for three to five years.
The Zacks Consensus Estimate for Dollar Tree’s current financialyear revenues and EPS suggests growth of 6.7% and 40.9%, respectively, from the year-ago reported figure. DLTR has a trailing four-quarter earnings surprise of 13.1%, on average.