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Ulta Beauty's (ULTA) Omnichannel & Skincare Strength Aid Growth
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Ulta Beauty, Inc. (ULTA - Free Report) has carved a solid position in the beauty space with its concerted omnichannel efforts as part of its core priorities. The company has been gaining from favorable demand across categories, with skincare standing out for a while now. Guests’ increased focus on self-care and maintaining healthy skincare routines works well for the skincare category.
However, high SG&A expenses have been a concern. On its first-quarter earnings call, management stated that while the operating landscape is likely to keep evolving, it remains confident about the resilience of the beauty category.
Ulta Beauty expects fiscal 2023 net sales in the range of $11-$11.1 billion compared with $10.2 billion reported in fiscal 2022. Comparable sales are expected to rise 4-5%.
Moreover, the company expects comp growth in the first half in the high-single-digit range and moderate-to-low-single-digit growth in the second half of the year. For fiscal 2023, earnings are envisioned in the band of $24.70-$25.40 per share, suggesting a rise from the $24.01 per share reported in fiscal 2022.
Image Source: Zacks Investment Research
Core Priorities – Omnichannel a Key Driver
The company’s foremost priority is to strengthen its omnichannel business and explore the potential of both physical and digital facets. 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 fiscal 2022, ULTA launched its new alliance with Target and has 359 Ulta Beauty at Target shop-in-shop locations (as of the end of the first quarter of fiscal 2023). Apart from this, 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 buy online, pickup in store (BOPIS) has been gaining traction for a while. Store traffic trends have also been robust. For fiscal 2023, ULTA expects 25-30 net new stores along with 20-30 store remodeling and relocation projects.
Moving to the next priority, Ulta Beauty has been undertaking various tools to enhance the experience of guests. These include offering a virtual try-on tool and in-store education and reimagining fixtures, among others.
Thirdly, the company concentrates on offering customers a curated and exclusive range of beauty products through innovation. Fourthly, ULTA 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 culture.
Skincare Stands Out
Ulta Beauty has been seeing market share gains in major beauty categories, with skincare benefiting from consumers’ rising interest in self-care and the company’s focus on newness and innovation. The trend continued in the first quarter of fiscal 2023, wherein skincare was the company’s best-performing category. ULTA saw double-digit growth in both mass and prestige, mainly due to newness, attractive social media content and solid performance through 21 Days of Beauty and Spring Haul.
Results gained from newness in brands like Drunk Elephant, The Ordinary and Hero cosmetics, along with new brands like Bubble, Beautycounter and BYOMA.
SG&A Costs Hurt
Ulta Beauty’s SG&A expenses have been rising year over year for a while now. In the first quarter of fiscal 2023, SG&A expenses rose 22.2% to $612.1 million. As a percentage of net sales, SG&A expenses came in at 23.2%, up from 21.4% reported in the year-ago quarter. The increase was due to the deleveraging of store payroll and benefits, corporate overheads and marketing expenses. The operating margin decreased from 18.7% to 16.8%.
Management expects an operating margin between 14.5% and 14.8%. This reflects an increased gross margin deleverage view, which includes the effects of increased shrink and a more competitive and promotional landscape. The company continues to expect SG&A deleverage due to additional expenditures associated with strategic investments and the effects of overall inflation.
However, the abovementioned upsides are likely to help this Zacks Rank #3 (Hold) company remain on the growth trajectory. Shares of ULTA have rallied 15.7% in the past year compared with the industry’s growth of 12.2%.
The Zacks Consensus Estimate for Abercrombie & Fitch’s current fiscal-year EPS suggests a considerable increase from the year-ago reported number.
Urban Outfitters (URBN - Free Report) , which engages in the retail and wholesale of general consumer products, currently sports a Zacks Rank #1. URBN has a trailing four-quarter earnings surprise of 12.2%, on average.
The Zacks Consensus Estimate for Urban Outfitters’ current fiscal-year earnings suggests growth of 57.1% from the year-ago reported number.
The supermarket giant, Walmart Inc. (WMT - Free Report) , currently carries a Zacks Rank #2 (Buy). WMT has a trailing four-quarter earnings surprise of around 12%, on average.
The Zacks Consensus Estimate for Walmart’s current fiscal-year sales suggests growth of 4.2% from the year-ago reported number.
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Ulta Beauty's (ULTA) Omnichannel & Skincare Strength Aid Growth
Ulta Beauty, Inc. (ULTA - Free Report) has carved a solid position in the beauty space with its concerted omnichannel efforts as part of its core priorities. The company has been gaining from favorable demand across categories, with skincare standing out for a while now. Guests’ increased focus on self-care and maintaining healthy skincare routines works well for the skincare category.
However, high SG&A expenses have been a concern. On its first-quarter earnings call, management stated that while the operating landscape is likely to keep evolving, it remains confident about the resilience of the beauty category.
Ulta Beauty expects fiscal 2023 net sales in the range of $11-$11.1 billion compared with $10.2 billion reported in fiscal 2022. Comparable sales are expected to rise 4-5%.
Moreover, the company expects comp growth in the first half in the high-single-digit range and moderate-to-low-single-digit growth in the second half of the year. For fiscal 2023, earnings are envisioned in the band of $24.70-$25.40 per share, suggesting a rise from the $24.01 per share reported in fiscal 2022.
Image Source: Zacks Investment Research
Core Priorities – Omnichannel a Key Driver
The company’s foremost priority is to strengthen its omnichannel business and explore the potential of both physical and digital facets. 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 fiscal 2022, ULTA launched its new alliance with Target and has 359 Ulta Beauty at Target shop-in-shop locations (as of the end of the first quarter of fiscal 2023). Apart from this, 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 buy online, pickup in store (BOPIS) has been gaining traction for a while. Store traffic trends have also been robust. For fiscal 2023, ULTA expects 25-30 net new stores along with 20-30 store remodeling and relocation projects.
Moving to the next priority, Ulta Beauty has been undertaking various tools to enhance the experience of guests. These include offering a virtual try-on tool and in-store education and reimagining fixtures, among others.
Thirdly, the company concentrates on offering customers a curated and exclusive range of beauty products through innovation. Fourthly, ULTA 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 culture.
Skincare Stands Out
Ulta Beauty has been seeing market share gains in major beauty categories, with skincare benefiting from consumers’ rising interest in self-care and the company’s focus on newness and innovation. The trend continued in the first quarter of fiscal 2023, wherein skincare was the company’s best-performing category. ULTA saw double-digit growth in both mass and prestige, mainly due to newness, attractive social media content and solid performance through 21 Days of Beauty and Spring Haul.
Results gained from newness in brands like Drunk Elephant, The Ordinary and Hero cosmetics, along with new brands like Bubble, Beautycounter and BYOMA.
SG&A Costs Hurt
Ulta Beauty’s SG&A expenses have been rising year over year for a while now. In the first quarter of fiscal 2023, SG&A expenses rose 22.2% to $612.1 million. As a percentage of net sales, SG&A expenses came in at 23.2%, up from 21.4% reported in the year-ago quarter. The increase was due to the deleveraging of store payroll and benefits, corporate overheads and marketing expenses. The operating margin decreased from 18.7% to 16.8%.
Management expects an operating margin between 14.5% and 14.8%. This reflects an increased gross margin deleverage view, which includes the effects of increased shrink and a more competitive and promotional landscape. The company continues to expect SG&A deleverage due to additional expenditures associated with strategic investments and the effects of overall inflation.
However, the abovementioned upsides are likely to help this Zacks Rank #3 (Hold) company remain on the growth trajectory. Shares of ULTA have rallied 15.7% in the past year compared with the industry’s growth of 12.2%.
Promising Retail Stocks
Abercrombie & Fitch (ANF - Free Report) , which operates as a specialty retailer, currently sports a Zacks Rank #1 (Strong Buy). ANF has a trailing four-quarter earnings surprise of 480.6%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Abercrombie & Fitch’s current fiscal-year EPS suggests a considerable increase from the year-ago reported number.
Urban Outfitters (URBN - Free Report) , which engages in the retail and wholesale of general consumer products, currently sports a Zacks Rank #1. URBN has a trailing four-quarter earnings surprise of 12.2%, on average.
The Zacks Consensus Estimate for Urban Outfitters’ current fiscal-year earnings suggests growth of 57.1% from the year-ago reported number.
The supermarket giant, Walmart Inc. (WMT - Free Report) , currently carries a Zacks Rank #2 (Buy). WMT has a trailing four-quarter earnings surprise of around 12%, on average.
The Zacks Consensus Estimate for Walmart’s current fiscal-year sales suggests growth of 4.2% from the year-ago reported number.