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Ulta Beauty (ULTA) Gains From Omnichannel & Skincare Strength
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Ulta Beauty, Inc. (ULTA - Free Report) appears to be in great shape due to its robust omnichannel operations. The company’s buy online, pick up in store (BOPIS) has been particularly working well. A focus on its core priorities is another driver for this beauty retailer.
Markedly, Ulta Beauty is seeing strength in all categories, with skincare standing out due to consumers’ rising interest in self-care and the company’s focus on newness and innovation.
These upsides drove this Zacks Rank #1 (Strong Buy) company in the second quarter of fiscal 2022, wherein the top and bottom lines advanced year over year and surpassed the Zacks Consensus Estimate. 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.
Considering the second-quarter performance and sales trends witnessed till August, management raised its fiscal 2022 view.
The Zacks Consensus Estimate for fiscal 2022 earnings per share (EPS) has risen from $20.07 to $21.36 over the past 60 days. Let’s delve deeper into the factors working well for Ulta Beauty.
Ulta Beauty Inc. Price, Consensus and EPS Surprise
Net sales surged 16.8% year over year to $2,297.1 million in the second quarter 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.
Solid sales and the company’s ongoing cost-optimization efforts aided the bottom line. Ulta Beauty posted an 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.
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.
Management now expects the operating margin between 14.6% and 14.8% in fiscal 2022, which was earlier expected between 14.1% and 14.4%. 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.
Key Drivers
Ulta Beauty is known for its strategy of striking the right balance between online and physical stores. It 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 fiscal 2022, the company launched its new alliance with Target and opened 100 Ulta Beauty at Target locations. In the second quarter of fiscal 2022, the company opened 59 Ulta Beauty at Target shops and ended the quarter with 186 locations.
Also, Ulta Beauty is benefiting from its Wellness Shop launch (in the fourth quarter of fiscal 2021), which is a cross-category platform providing guests self-care for the mind, body and spirit across several stores as well as online. The company’s BOPIS continued to gain traction in the second quarter. BOPIS sales rose 32% and contributed 25% to e-commerce sales. More than one-third of the company’s digital orders were completed by stores.
Store traffic trends were robust in the second quarter, with more guests returning to in-store buying and services. The company introduced seven stores in the second quarter and plans to open 50 net new stores in fiscal 2022, along with carrying out 35 store remodeling and relocation projects.
Ulta Beauty has been seeing market share gains in major beauty categories for a while now, with skincare standing out. The trend continued in the second quarter of fiscal 2022, wherein skincare was one of the best-performing categories of the company — wherein both mass and prestige delivered double-digit comp growth. This resulted from product innovation and new brands. Guests’ increased focus on self-care and maintaining healthy skincare routines works well for this category.
ULTA has been focused on its six strategic priorities. The company’s foremost priority is to strengthen its omnichannel business and explore the potential of both physical and digital facets. Next, the company is 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.
Thirdly, Ulta Beauty concentrates on offering customers a curated and exclusive range of beauty products through innovation. Fourthly, the company is focused on deepening customer engagement by boosting rewards and loyalty programs. Fifthly, management is committed to optimizing its cost structure. Apart from these, the company strives to boost organizational talent and strengthen the culture.
All said, we believe that Ulta Beauty remains well-placed for growth. Shares of the company have climbed 0.4% in the past three months compared with the industry’s rise of 4.6%.
Tractor Supply, which operates as a rural lifestyle retailer, carries a Zacks Rank #2 (Buy). Tractor Supply has a trailing four-quarter earnings surprise of 10.2%, on average. TSCO has an expected EPS growth rate of 10.2% for three to five years. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Tractor Supply’s current financial-year sales suggests growth of 10.7% from the year-ago reported number.
Kroger, a renowned grocery retailer, currently carries a Zacks Rank #2. KR has an expected EPS growth rate of 11.7% for three to five years.
The Zacks Consensus Estimate for Kroger’s current financial-year revenues and EPS suggests growth of 7.8% and 10.3%, respectively, from the year-ago reported figure. KR has a trailing four-quarter earnings surprise of 15.7%, on average.
DICK'S Sporting, which operates as a sporting goods retailer, carries a Zacks Rank #2. The company has a trailing four-quarter earnings surprise of nearly 21.4%, on average.
The Zacks Consensus Estimate for DICK'S Sporting’s current financial-year EPS has risen from $10.77 to $11.42 in the past 30 days. DKS has an expected EPS growth rate of 5% for three to five years.
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Ulta Beauty (ULTA) Gains From Omnichannel & Skincare Strength
Ulta Beauty, Inc. (ULTA - Free Report) appears to be in great shape due to its robust omnichannel operations. The company’s buy online, pick up in store (BOPIS) has been particularly working well. A focus on its core priorities is another driver for this beauty retailer.
Markedly, Ulta Beauty is seeing strength in all categories, with skincare standing out due to consumers’ rising interest in self-care and the company’s focus on newness and innovation.
These upsides drove this Zacks Rank #1 (Strong Buy) company in the second quarter of fiscal 2022, wherein the top and bottom lines advanced year over year and surpassed the Zacks Consensus Estimate. 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.
Considering the second-quarter performance and sales trends witnessed till August, management raised its fiscal 2022 view.
The Zacks Consensus Estimate for fiscal 2022 earnings per share (EPS) has risen from $20.07 to $21.36 over the past 60 days. Let’s delve deeper into the factors working well for Ulta Beauty.
Ulta Beauty Inc. Price, Consensus and EPS Surprise
Ulta Beauty Inc. price-consensus-eps-surprise-chart | Ulta Beauty Inc. Quote
Robust Q2 & Raised View
Net sales surged 16.8% year over year to $2,297.1 million in the second quarter 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.
Solid sales and the company’s ongoing cost-optimization efforts aided the bottom line. Ulta Beauty posted an 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.
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.
Management now expects the operating margin between 14.6% and 14.8% in fiscal 2022, which was earlier expected between 14.1% and 14.4%. 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.
Key Drivers
Ulta Beauty is known for its strategy of striking the right balance between online and physical stores. It 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 fiscal 2022, the company launched its new alliance with Target and opened 100 Ulta Beauty at Target locations. In the second quarter of fiscal 2022, the company opened 59 Ulta Beauty at Target shops and ended the quarter with 186 locations.
Also, Ulta Beauty is benefiting from its Wellness Shop launch (in the fourth quarter of fiscal 2021), which is a cross-category platform providing guests self-care for the mind, body and spirit across several stores as well as online.
The company’s BOPIS continued to gain traction in the second quarter. BOPIS sales rose 32% and contributed 25% to e-commerce sales. More than one-third of the company’s digital orders were completed by stores.
Store traffic trends were robust in the second quarter, with more guests returning to in-store buying and services. The company introduced seven stores in the second quarter and plans to open 50 net new stores in fiscal 2022, along with carrying out 35 store remodeling and relocation projects.
Ulta Beauty has been seeing market share gains in major beauty categories for a while now, with skincare standing out. The trend continued in the second quarter of fiscal 2022, wherein skincare was one of the best-performing categories of the company — wherein both mass and prestige delivered double-digit comp growth. This resulted from product innovation and new brands. Guests’ increased focus on self-care and maintaining healthy skincare routines works well for this category.
ULTA has been focused on its six strategic priorities. The company’s foremost priority is to strengthen its omnichannel business and explore the potential of both physical and digital facets. Next, the company is 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.
Thirdly, Ulta Beauty concentrates on offering customers a curated and exclusive range of beauty products through innovation. Fourthly, the company is focused on deepening customer engagement by boosting rewards and loyalty programs. Fifthly, management is committed to optimizing its cost structure. Apart from these, the company strives to boost organizational talent and strengthen the culture.
All said, we believe that Ulta Beauty remains well-placed for growth. Shares of the company have climbed 0.4% in the past three months compared with the industry’s rise of 4.6%.
Other Strong Retail Bets
Three other top-ranked stocks include Tractor Supply (TSCO - Free Report) , Kroger (KR - Free Report) and DICK'S Sporting Goods, Inc. (DKS - Free Report) .
Tractor Supply, which operates as a rural lifestyle retailer, carries a Zacks Rank #2 (Buy). Tractor Supply has a trailing four-quarter earnings surprise of 10.2%, on average. TSCO has an expected EPS growth rate of 10.2% for three to five years. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Tractor Supply’s current financial-year sales suggests growth of 10.7% from the year-ago reported number.
Kroger, a renowned grocery retailer, currently carries a Zacks Rank #2. KR has an expected EPS growth rate of 11.7% for three to five years.
The Zacks Consensus Estimate for Kroger’s current financial-year revenues and EPS suggests growth of 7.8% and 10.3%, respectively, from the year-ago reported figure. KR has a trailing four-quarter earnings surprise of 15.7%, on average.
DICK'S Sporting, which operates as a sporting goods retailer, carries a Zacks Rank #2. The company has a trailing four-quarter earnings surprise of nearly 21.4%, on average.
The Zacks Consensus Estimate for DICK'S Sporting’s current financial-year EPS has risen from $10.77 to $11.42 in the past 30 days. DKS has an expected EPS growth rate of 5% for three to five years.