We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Why Is Ulta (ULTA) Down 21.9% Since Last Earnings Report?
Read MoreHide Full Article
It has been about a month since the last earnings report for Ulta Beauty (ULTA - Free Report) . Shares have lost about 21.9% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Ulta due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Ulta Beauty Q1 Earnings & Revenues Miss Estimates
In first-quarter fiscal 2020, Ulta Beauty posted an adjusted loss of $1.12 per share against earnings of $3.08 reported in the year-ago period. The Zacks Consensus Estimate for earnings stood at 44 cents. The dismal performance can be accountable to lower sales and margins.
Net sales of this beauty retailer slumped 32.7% year over year to $1,173.2 million and missed the Zacks Consensus Estimate of $1,199 million. Sales were hurt by coronavirus-led store closures. Comparable sales or comps (including stores temporarily closed due to the pandemic and e-commerce sales) plummeted 35.3% against 7% growth recorded in the prior-year quarter. Comps rose 4% in the preceding quarter. During the quarter, the company registered a transaction increase of 38.6%, partly made up by a rise in average ticket of 3.3%.
Gross margin collapsed from 37% to 25.9% due to fixed store cost deleverage, unfavorable channel mix shifts and deleverage of salon costs due to lower sales. This was somewhat offset by reduced promotions.
The company posted an operating loss of $101.5 million against an operating income of $237.5 million in the year-ago period. Notably, SG&A expenses (as a percentage of sales) escalated from 23.1% to 32.5% on account of a deleverage stemming from lower sales due to COVID-19. Pre-opening expenses grew 9.5% to $4.6 million.
The company, which had withdrawn its fiscal 2020 guidance on Mar 17, did not offer any earnings guidance at this juncture.
Other Financials
Ulta Beauty ended the quarter with cash and cash equivalents of $1,043.5 million and total stockholders’ equity of approximately $1,754 million. Net merchandise inventories summed $1,340.6 million at the end of the quarter, increasing 7.2% from the year-ago period. Average inventory per store rose 1.5% year over year. Net cash used in operating activities was $24,318 million in the first quarter.
Ulta Beauty bought back 326,970 shares for $73 million in the reported quarter. The company had shares worth $1.58 billion outstanding, as of May 2, 2020, under its $1.6-billion share repurchase plan announced in March 2020. On Apr 2, the company announced that it suspended its buyback program to protect financial position amid the crisis. Moreover, the company has curtailed its capital expenditure plan and now anticipates spending $200-$210 million in this regard in fiscal 2020. Apart from this, in the first quarter, the company drew down $800 million from its credit facility of $1 billion as a safety measure amid the pandemic.
During the quarter, Ulta Beauty opened 11 stores, relocated one and permanently closed another. The company ended the quarter with 1,264 stores. Owing to the current situation, management has lowered its store opening and relocation plans. It now anticipates opening 30-40 stores in fiscal 2020 alongside undertaking nearly three relocation projects. Earlier, the company expected to open about 75 stores, remodel or relocate roughly 15 and refresh nearly 42.
Update on COVID-19
We note that the company has been taking all steps to ensure the safety of its customers and employees amid the pandemic. In this regard, it temporarily closed all stores on Mar 19, though it kept its important online operations active. The company also furloughed many store and salon workers temporarily on Apr 19. Additionally, it is curtailing several costs and undertaking measures like suspending share buybacks and reducing store openings, among others, to protect its financial flexibility amid the pandemic.
Notably, Ulta Beauty has started reopening stores and has 333 stores open for visitors and 840 stores offering curbside pickup as of today. The company is seeing greater-than-expected sales in reopened stores. Management plans to continue reopening stores and extend services in a phased manner, per the regulatory guidelines. However, the company, which had withdrawn its fiscal 2020 guidance on Mar 17, did not offer any earnings guidance at this juncture.
Update on COVID-19
We note that the company has been taking all steps to ensure the safety of its customers and employees amid the pandemic. In this regard, it temporarily closed all stores on Mar 19, though it kept its important online operations active. The company also furloughed many store and salon workers temporarily on Apr 19. Additionally, it is curtailing several costs and undertaking measures like suspending share buybacks and reducing store openings, among others, to protect its financial flexibility amid the pandemic.
Notably, Ulta Beauty has started reopening stores and has 333 stores open for visitors and 840 stores offering curbside pickup as of today. The company is seeing greater-than-expected sales in reopened stores. Management plans to continue reopening stores and extend services in a phased manner, per the regulatory guidelines.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month. The consensus estimate has shifted -74.58% due to these changes.
VGM Scores
Currently, Ulta has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, Ulta has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Why Is Ulta (ULTA) Down 21.9% Since Last Earnings Report?
It has been about a month since the last earnings report for Ulta Beauty (ULTA - Free Report) . Shares have lost about 21.9% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Ulta due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Ulta Beauty Q1 Earnings & Revenues Miss Estimates
In first-quarter fiscal 2020, Ulta Beauty posted an adjusted loss of $1.12 per share against earnings of $3.08 reported in the year-ago period. The Zacks Consensus Estimate for earnings stood at 44 cents. The dismal performance can be accountable to lower sales and margins.
Net sales of this beauty retailer slumped 32.7% year over year to $1,173.2 million and missed the Zacks Consensus Estimate of $1,199 million. Sales were hurt by coronavirus-led store closures. Comparable sales or comps (including stores temporarily closed due to the pandemic and e-commerce sales) plummeted 35.3% against 7% growth recorded in the prior-year quarter. Comps rose 4% in the preceding quarter. During the quarter, the company registered a transaction increase of 38.6%, partly made up by a rise in average ticket of 3.3%.
Gross margin collapsed from 37% to 25.9% due to fixed store cost deleverage, unfavorable channel mix shifts and deleverage of salon costs due to lower sales. This was somewhat offset by reduced promotions.
The company posted an operating loss of $101.5 million against an operating income of $237.5 million in the year-ago period. Notably, SG&A expenses (as a percentage of sales) escalated from 23.1% to 32.5% on account of a deleverage stemming from lower sales due to COVID-19. Pre-opening expenses grew 9.5% to $4.6 million.
The company, which had withdrawn its fiscal 2020 guidance on Mar 17, did not offer any earnings guidance at this juncture.
Other Financials
Ulta Beauty ended the quarter with cash and cash equivalents of $1,043.5 million and total stockholders’ equity of approximately $1,754 million. Net merchandise inventories summed $1,340.6 million at the end of the quarter, increasing 7.2% from the year-ago period. Average inventory per store rose 1.5% year over year. Net cash used in operating activities was $24,318 million in the first quarter.
Ulta Beauty bought back 326,970 shares for $73 million in the reported quarter. The company had shares worth $1.58 billion outstanding, as of May 2, 2020, under its $1.6-billion share repurchase plan announced in March 2020. On Apr 2, the company announced that it suspended its buyback program to protect financial position amid the crisis. Moreover, the company has curtailed its capital expenditure plan and now anticipates spending $200-$210 million in this regard in fiscal 2020. Apart from this, in the first quarter, the company drew down $800 million from its credit facility of $1 billion as a safety measure amid the pandemic.
During the quarter, Ulta Beauty opened 11 stores, relocated one and permanently closed another. The company ended the quarter with 1,264 stores. Owing to the current situation, management has lowered its store opening and relocation plans. It now anticipates opening 30-40 stores in fiscal 2020 alongside undertaking nearly three relocation projects. Earlier, the company expected to open about 75 stores, remodel or relocate roughly 15 and refresh nearly 42.
Update on COVID-19
We note that the company has been taking all steps to ensure the safety of its customers and employees amid the pandemic. In this regard, it temporarily closed all stores on Mar 19, though it kept its important online operations active. The company also furloughed many store and salon workers temporarily on Apr 19. Additionally, it is curtailing several costs and undertaking measures like suspending share buybacks and reducing store openings, among others, to protect its financial flexibility amid the pandemic.
Notably, Ulta Beauty has started reopening stores and has 333 stores open for visitors and 840 stores offering curbside pickup as of today. The company is seeing greater-than-expected sales in reopened stores. Management plans to continue reopening stores and extend services in a phased manner, per the regulatory guidelines. However, the company, which had withdrawn its fiscal 2020 guidance on Mar 17, did not offer any earnings guidance at this juncture.
Update on COVID-19
We note that the company has been taking all steps to ensure the safety of its customers and employees amid the pandemic. In this regard, it temporarily closed all stores on Mar 19, though it kept its important online operations active. The company also furloughed many store and salon workers temporarily on Apr 19. Additionally, it is curtailing several costs and undertaking measures like suspending share buybacks and reducing store openings, among others, to protect its financial flexibility amid the pandemic.
Notably, Ulta Beauty has started reopening stores and has 333 stores open for visitors and 840 stores offering curbside pickup as of today. The company is seeing greater-than-expected sales in reopened stores. Management plans to continue reopening stores and extend services in a phased manner, per the regulatory guidelines.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month. The consensus estimate has shifted -74.58% due to these changes.
VGM Scores
Currently, Ulta has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, Ulta has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.