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Ulta Beauty CEO outlines plans to boost sales after first-quarter slowdown, shares jump 11%

Ulta Beauty on Thursday laid out plans to boost sales and gain market share after a first-quarter sales slowdown.

Comparable sales, a metric that tracks Ulta stores open at least 14 months along with online sales, increased 1.6% year over year, a stark slowdown from the same period a year earlier when Ulta reported comparable sales growth of 9.3%

“We expect growth to accelerate in the second half of the year, to be between 2% and 4% reflecting the impact of our sales-driving initiatives,” finance chief Paula Oyibo said during the company’s earnings call.

Ulta CEO Dave Kimbell in April warned of cooling demand in the beauty category at an investor conference. And while the slowdown was largely anticipated, Kimbell said it hit the company “a bit earlier and bit bigger” than expected.

Kimbell on Thursday acknowledged market share has been challenged in the past quarters, particularly within the prestige beauty category.

“We are not satisfied with our market share trends and we’re taking actions to reinforce our leadership position and accelerate growth,” Kimbell said during the earnings call, adding the company will share further long-term plans at its analyst day in October.

Kimbell outlined five key areas in which the company is planning on taking concrete action: strengthening assortment through 25 new brands including Ulta-exclusives with celebrities like Serena Williams and Bella Hadid; accelerating social relevance through scaling its creator network; enhancing the consumer digital experience; leveraging the loyalty program; and evolving promotional levers.

The company will also expand its partnership with delivery service DoorDash, where it offers same-day delivery from its stores, and lean in on their app adoption. The Ulta app accounted for 57% of e-commerce sales in the quarter, Kimbell said.

Kimbell also announced the company is testing new gamification platforms and later this year will activate new marketing technology that will help guests personalize their shopping experience.

Shares of Ulta gained about 11% in extended trading Thursday.

Here’s how the beauty company performed during the period compared to what Wall Street was anticipating, based on a survey of analysts by LSEG:

Ulta reported net income for the quarter ended May 4 of $313.1 million, or $6.47 per share, compared with $347.1 million, or $6.88 per share, a year earlier. 

Net sales rose slightly to $2.73 billion from $2.63 billion a year earlier.

The company lowered its guidance for the fiscal year. Ulta reported that it is now expecting net sales in the range of $11.5 billion to $11.6 billion and comparable sales in the range of 2% to 3%. It had previously guided to full-year net sales of $11.7 billion to $11.8 billion and comparable sales of 4% to 5%.

Ulta also revised its full-year earnings per share guidance to a range of $25.20 to $26, down from its previous guidance of $26.20 to $27.

Ulta Beauty has been a strong performer for retailers as they face a consumer pullback in light of persistently higher costs. Beauty brand e.l.f recently reported its first billion-dollar fiscal year, blowing past Wall Street estimates and sending shares soaring.

Artificial intelligence-powered beauty company Oddity Tech recently told CNBC the industry isn’t seeing so much a slowdown but rather a shift in the business.

“What we do see is an industry that’s transforming. So the consumer is moving online and the consumer is moving to high-efficacy products that really solve their problems,” Oddity finance chief Lindsay Drucker Mann told CNBC.

The Wall Street view of Ulta has been cooling ahead of the company’s earnings report, with analysts at Baird and Canaccord Genuity lowering their price targets in recent days.

“We believe the beauty category is resilient. Despite reduced spending on discretionary items, consumers continue to prioritize beauty products, leading to significant growth in this category,” analysts at Jane Hali & Associates said in a recent note on Ulta, adding that although they view the wellness category as a key strength, they are cautious on the makeup category.

Shares of the company closed at $385.58 per share on Thursday, bringing the company’s market value to about $18.5 billion.

This post appeared first on NBC NEWS
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