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Ulta Beauty Shuts Stores, Withdraws Guidance Amid Coronavirus

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Like several other retailers, Ulta Beauty, Inc. (ULTA - Free Report) announced temporary store closure plans amid the growing spread of COVID-19. The beauty retailer said that it will temporarily shut down all stores from 6:00 pm, Mar 19, 2020, till at least Mar 31. Nonetheless, most of its stores can be accessed for the buy online and pick up in store facility, as permitted by regulations. Also, shoppers can keep purchasing online, via Ulta Beauty app or ulta.com.

Management will continue to make payments to its store and salon associates alongside offering benefits to workers employed for the abovementioned period. However, the company withdrew its recently provided guidance for fiscal 2020, given the current situation and its unpredictable impact on revenues and costs. During the fourth-quarter earnings call, management expected total sales to increase 7-8%, while comps were anticipated to rise 3-4% in fiscal 2020. Earnings per share were envisioned to be $12.55-$12.75.

For now, management withdrew this guidance and refrained from providing any update on the same. Well, this move has been undertaken by many other retailers, including Abercrombie & Fitch (ANF - Free Report) , Nordstrom (JWN - Free Report) and American Eagle Outfitters (AEO - Free Report) , who also announced store closures due to the global pandemic.



The coronavirus, which originated in China, has spread enormously to the extent that cases and deaths outside the nation have exceeded the number in China, per a World Health Organization (WHO) report. Sadly, the global pandemic has infected more than 170,000 people worldwide and the death toll has crossed 7,000. While the deadly virus has jeopardized the global economy, the retail sector (in particular) remains under pressure due to supply-chain bottlenecks, reduced traffic, an increasing number of store closures and limited hours of working.

Coming back to Ulta Beauty, online sales have been a major driver for the company, courtesy of its concerted efforts to boost omnichannel business.  In fiscal 2019, omnichannel penetration increased and e-commerce sales grew in strong double digits. Management stated that the percentage of shoppers buying online and in stores increased to more than 12% in the fiscal.

Further, this Zacks Rank #3 (Hold) company concluded the rollout of the buy online, pickup in store initiative across all stores, refreshed its mobile app and introduced “Afterpay” to ease online purchases. Further, its store-to-door strategy has been yielding results. Apart from this, the company converted its Romeoville distribution center into a Fast Fulfillment Center. These efforts along with improved productivity in full-service facilities have helped the company speed up e-commerce order processing and ensure seamless and faster deliveries to stores.

We note that shares of the company have plunged 38.4% in the past three months compared with the industry’s decline of 40.2%.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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