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Ulta Beauty (ULTA) Up on Omni-Channel Growth & Skincare Sales
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A positive view of the beauty space is keeping Ulta Beauty, Inc. (ULTA - Free Report) well-positioned. The company has been striking the right balance between growth across online and offline sales channel. Management is seeing market share gains in major beauty categories, with skincare standing out. However, it is not immune to a rising inflationary environment.
Let’s delve deeper.
Favorable Trends Boost Growth
Ulta Beauty is benefiting from healthy traffic trends, greater brand awareness and the expansion of its loyalty program. Management is on track with transformational initiatives, which are yielding. These factors boosted third-quarter fiscal 2023 results, with net sales rising 6.4% to $2,488.9 million on higher comparable sales, solid new store performance and an increase in other revenues. Comparable sales rose 4.5%, driven by a 5.9% improvement in transactions stemming from healthy traffic across all channels.
Image Source: Zacks Investment Research
Strong Omni-Channel Presence
People are effortlessly moving between physical and digital channels as ULTA continues to invest in enhancing guest experience in all touch points. In August 2023, management concluded the transition of the digital commerce experience, which includes cart, promotions, checkout and member account data, to its new architecture. The modernization of its digital technology ecosystem is aiding the company in elevating and optimizing existing guest experiences while driving digital innovation, utilizing a modern and agile approach.
Ulta Beauty is keen on enhancing its in-store experiences to drive spending, increase frequency and create loyalty. In the fiscal third quarter, the company launched a guest engagement model to enhance guest experience via real engagement, experiences and interactions. Management is on track to expand the Ulta Beauty at Target experience.
Skincare Category: Key Driver
Ulta Beauty is seeing market share gains in skincare thanks to consumers’ rising interest in self-care and its focus on newness and innovation. The trend continued in the third quarter of fiscal 2023, wherein skincare was the company’s fastest-growing category. Results gained from strength in brands like Drunk Elephant, La Roche-Posay, Cetaphil, Dermalogica and COSRX. Guests’ increased focus on self-care and maintaining healthy skincare routines works well for the skincare category.
High Costs Hurt
The company has been witnessing persistent margin pressure thanks to higher supply-chain costs and reduced merchandise margins, among other reasons. In third-quarter fiscal 2023, the company’s gross margin was 39.9%, down 130 basis points (bps) year over year on higher inventory shrink, reduced merchandise margins and elevated supply-chain costs.
Also, rising SG&A expenses continue to hamper the company’s profitability. As a percentage of net sales, SG&A expenses came in at 26.6%, up from 25.5% in the fiscal third quarter. The downside was caused by increased corporate overheads related to strategic investments, deleverage of store payroll and benefits, increased store expenses and greater marketing expenses.
The aforementioned upsides are likely to keep narrating the company’s growth story. The Zacks Rank #3 (Hold) company’s shares have increased 19% in the past three months compared with the industry’s growth of 9.4%.
The Zacks Consensus Estimate for Regis Corp’s current fiscal year earnings suggests growth of 43.5% from the year-ago period’s reported figure. RGS has a trailing four-quarter earnings surprise of 22%, on average.
Abercrombie & Fitch Co. (ANF - Free Report) operates as a specialty retailer of premium, high-quality casual apparel. ANF currently sports a Zacks Rank #1.
The Zacks Consensus Estimate for Abercrombie’s current fiscal year sales suggests growth of 13.3% from the year-ago reported number. ANF has a trailing four-quarter earnings surprise of 713%, on average.
MarineMax (HZO - Free Report) , a recreational boat and yacht retailer and a superyacht services company, carries a Zacks Rank #2 (Buy). MarineMax has a trailing four-quarter negative earnings surprise of 10.1% on average.
The Zacks Consensus Estimate for HZO’s current financial year sales suggests growth of 3.1% from the year-ago period’s figures.
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Ulta Beauty (ULTA) Up on Omni-Channel Growth & Skincare Sales
A positive view of the beauty space is keeping Ulta Beauty, Inc. (ULTA - Free Report) well-positioned. The company has been striking the right balance between growth across online and offline sales channel. Management is seeing market share gains in major beauty categories, with skincare standing out. However, it is not immune to a rising inflationary environment.
Let’s delve deeper.
Favorable Trends Boost Growth
Ulta Beauty is benefiting from healthy traffic trends, greater brand awareness and the expansion of its loyalty program. Management is on track with transformational initiatives, which are yielding. These factors boosted third-quarter fiscal 2023 results, with net sales rising 6.4% to $2,488.9 million on higher comparable sales, solid new store performance and an increase in other revenues. Comparable sales rose 4.5%, driven by a 5.9% improvement in transactions stemming from healthy traffic across all channels.
Image Source: Zacks Investment Research
Strong Omni-Channel Presence
People are effortlessly moving between physical and digital channels as ULTA continues to invest in enhancing guest experience in all touch points. In August 2023, management concluded the transition of the digital commerce experience, which includes cart, promotions, checkout and member account data, to its new architecture. The modernization of its digital technology ecosystem is aiding the company in elevating and optimizing existing guest experiences while driving digital innovation, utilizing a modern and agile approach.
Ulta Beauty is keen on enhancing its in-store experiences to drive spending, increase frequency and create loyalty. In the fiscal third quarter, the company launched a guest engagement model to enhance guest experience via real engagement, experiences and interactions. Management is on track to expand the Ulta Beauty at Target experience.
Skincare Category: Key Driver
Ulta Beauty is seeing market share gains in skincare thanks to consumers’ rising interest in self-care and its focus on newness and innovation. The trend continued in the third quarter of fiscal 2023, wherein skincare was the company’s fastest-growing category. Results gained from strength in brands like Drunk Elephant, La Roche-Posay, Cetaphil, Dermalogica and COSRX. Guests’ increased focus on self-care and maintaining healthy skincare routines works well for the skincare category.
High Costs Hurt
The company has been witnessing persistent margin pressure thanks to higher supply-chain costs and reduced merchandise margins, among other reasons. In third-quarter fiscal 2023, the company’s gross margin was 39.9%, down 130 basis points (bps) year over year on higher inventory shrink, reduced merchandise margins and elevated supply-chain costs.
Also, rising SG&A expenses continue to hamper the company’s profitability. As a percentage of net sales, SG&A expenses came in at 26.6%, up from 25.5% in the fiscal third quarter. The downside was caused by increased corporate overheads related to strategic investments, deleverage of store payroll and benefits, increased store expenses and greater marketing expenses.
The aforementioned upsides are likely to keep narrating the company’s growth story. The Zacks Rank #3 (Hold) company’s shares have increased 19% in the past three months compared with the industry’s growth of 9.4%.
3 Key Picks
Regis Corporation (RGS - Free Report) owns, franchises and operates beauty salons. RGS currently flaunts a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Regis Corp’s current fiscal year earnings suggests growth of 43.5% from the year-ago period’s reported figure. RGS has a trailing four-quarter earnings surprise of 22%, on average.
Abercrombie & Fitch Co. (ANF - Free Report) operates as a specialty retailer of premium, high-quality casual apparel. ANF currently sports a Zacks Rank #1.
The Zacks Consensus Estimate for Abercrombie’s current fiscal year sales suggests growth of 13.3% from the year-ago reported number. ANF has a trailing four-quarter earnings surprise of 713%, on average.
MarineMax (HZO - Free Report) , a recreational boat and yacht retailer and a superyacht services company, carries a Zacks Rank #2 (Buy). MarineMax has a trailing four-quarter negative earnings surprise of 10.1% on average.
The Zacks Consensus Estimate for HZO’s current financial year sales suggests growth of 3.1% from the year-ago period’s figures.