Ulta Beauty, Inc. (ULTA Quick QuoteULTA - Free Report) posted splendid third-quarter fiscal 2022 results, with the top and the bottom line cruising past the Zacks Consensus Estimate and increasing year over year. The company witnessed growth in all major categories and in all its store and digital channels. Ulta Beauty also saw a higher market share in prestige beauty compared with the year-ago period.

Considering the third-quarter performance and anticipations for the fourth quarter, management raised its fiscal 2022 outlook.

Quarterly Numbers

Ulta Beauty posted earnings per share (EPS) of $5.34, beating the Zacks Consensus Estimate of $4.09. In the third quarter of fiscal 2021, the adjusted EPS amounted to $3.94.

Net sales of this beauty products retailer surged 17.2% year over year to $2,338.8 million and beat the Zacks Consensus Estimate of $2,193 million. The uptick can be attributed to the positive impact of the ongoing resilience of the beauty division, higher retail pricing, gains from new brands and product innovation.

Comparable sales jumped 14.6%, backed by a 10.7% improvement in transactions and a 3.5% increase in the average ticket. Transactions benefited from growth of in-store transactions, while average ticket benefited from a higher average selling price – partly negated by reduced units per transaction.

The gross profit increased 22% to $962.8 million. Gross profit, as a percentage of net sales, came in at 41.2%, up from 39.6% reported in the year-ago quarter. The upside can mainly be attributed to the leverage of fixed costs, solid growth in other revenues and greater merchandise margin, partly offset by increased inventory shrink.

Selling, general and administrative (SG&A) expenses rose 18.6% to $597.2 million. As a percentage of net sales, SG&A expenses stood at 25.5%, up from 25.2% reported in the year-ago quarter, due to store payroll and benefits deleverage, as well as corporate overheads. These were somewhat countered by reduced marketing costs.

The operating income came in at $361.9 million, up 27.3% year over year. The operating margin was 15.5%, up from 14.2% in the third quarter of fiscal 2021.

Other Updates

Ulta Beauty ended the quarter with cash and cash equivalents of $250.6 million. Net merchandise inventories came in at $2.1 billion at the end of the third quarter of fiscal 2022. Stockholders’ equity at the end of the quarter stood at $1,922.3 million. Net cash provided by operating activities was $573.4 million in the 39 weeks ended Oct 29, 2022.

The company repurchased 340,271 shares for $137.5 million in the third quarter. As of Oct 29, 2022, Ulta Beauty had shares worth $1.4 billion left under its buyback program announced in March 2022.

For fiscal 2022, capital expenditures are expected in the band of $300-$350 million.

During the reported quarter, the company introduced 18 new stores and relocated one. Ulta Beauty ended the quarter with 1,343 stores.

For fiscal 2022, ULTA expects 47 net new stores and 33 store remodeling and relocation projects.

Guidance

Ulta Beauty now expects fiscal 2022 net sales in the range of $9.95-$10 billion compared with the $9.65-$9.75 billion range expected earlier. Comps are expected to rise in the range of 12.6-13.2% compared with the earlier view of 9.5-10.5%. The company projects 6-8% comp growth in the fourth quarter.

For fiscal 2022, management now expects the operating margin to be between 15.5% and 15.6%, which was earlier expected between 14.6% and 14.8%. 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.

Ulta Beauty expects SG&A expenses to rise 15-16% in fiscal 2022, mainly owing to expenses associated with the company’s strategic priorities and increased wage rate partially offset by reduced marketing costs. Management expects to keep seeing inflationary pressure on operating expenses.

For fiscal 2022, earnings are envisioned in the range of $22.6-$22.9 per share now, up from the $20.7-$21.2 per share range expected before.

This Zacks Rank #3 (Hold) stock has gained 9.5% in the past three months compared with the industry’s 10.6% growth.

Retail Stocks to Consider

Some better-ranked stocks from the Retail-Wholesale sector are Tecnoglass (TGLS Quick QuoteTGLS - Free Report) , Ross Stores Inc. (ROST Quick QuoteROST - Free Report) and Dollar General (DG Quick QuoteDG - Free Report) .

Tecnoglass, engaged in the manufacturing and selling of architectural glass and windows and aluminum products for the residential and commercial construction industries, presently sports a Zacks Rank #1 (Strong Buy). TGLS has a trailing four-quarter earnings surprise of 26.9%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Tecnoglass’ current-year sales and EPS suggests growth of 40.5% and 76.4%, respectively, from the year-ago period’s reported numbers.

Ross Stores, an off-price retailer of apparel and home accessories in the United States, currently sports a Zacks Rank #1. ROST has an expected EPS growth rate of 10.5% for three to five years.

The Zacks Consensus Estimate for Ross Stores’ current-year sales and EPS suggests declines of 1.6% and 11.7%, respectively, from the year-ago period’s reported figures. ROST has a trailing four-quarter earnings surprise of 10.5%, on average.

Dollar General, one of the largest discount retailers in the United States, has a Zacks Rank of 2 (Buy) at present. DG has a trailing four-quarter earnings surprise of 2.2%, on average.

The Zacks Consensus Estimate for Dollar General’s current-year sales and EPS suggests growth of 10.8% and 13.9%, respectively, from the year-ago period’s reported numbers. DG has an expected EPS growth rate of 11.1% for three to five years.