Ulta Beats on Strong Sales Growth, Guidance Light

Ulta Salon, Cosmetics, and Fragrance ULTA reported first quarter results after the close that beat analyst expectations. However, the company guided slightly below consensus for the second quarter but shares still rose in after-hours trading.

Sales Growth Drives Earnings

For the first quarter of 2013 ended May 14, Ulta reported earnings per share of $0.65 vs. the consensus analyst forecast of $0.62. Earnings per share grew 20.4 percent from the same period a year ago when the company earned $0.54 per share.

Revenue strength drove earnings in the quarter as Ulta reported revenues of $582.7 million, better than the consensus forecast of $576.3 million. Net sales grew 22.9 percent from a year ago and comparable store sales grew 6.7 percent.

Outlook

For the second quarter of 2013, Ulta expects EPS to range between $0.64 and $0.67, slightly below the consensus analyst forecast of $0.68. Meanwhile, the company expects revenue to be between $579 million and $589 million, also slightly below the consensus forecast of $590.72 million. However, the company affirmed full year guidance.

Stock Buyback

Following the announcement of a stock buyback in March of $150 million, the company said that it has purchased 500,500 shares for $37.3 million at an average price of $74.58 per share. The $150 million buyback program amounts to about 2.8 percent of the company's market cap.

Expansion Update

The company announced that 28 new stores were opened in the quarter and closed two stores. Total square footage increased 24 percent in the quarter from a year ago to 6,121,399. Ulta announced previously that it plans to expand square footage 22 percent in 2013 and open 125 net new stores.

Management Commentary

Dennis Eck, Interim Chief Executive Officer, stated, “We are pleased to announce a strong start to fiscal 2013, with better than expected sales and margin performance. We are on track to add 125 stores this year, and continue to drive outstanding new store productivity. We opened Clinique boutiques in eight more stores, ending the quarter with 51 stores offering Clinique products, with further expansion planned for the rest of the year."

"We are delighted to announce the addition of 25 Lancôme boutiques planned for the fall of 2013, and expect to end the year with a significant percentage of our stores featuring one of these iconic brand boutiques. We continue to grow our loyalty programs and enhance our ability to communicate with our customers with our CRM platform, and plan to convert all our loyalty program members to one program, ULTAmate Rewards, in early 2014."

"Ulta.com delivered 70% sales growth during the quarter and we are looking forward to launching our redesigned e-commerce platform this fall. The team is executing our growth strategies very well, and our outlook for continued market share gains is excellent.”

Shares Gain

Ulta shares rose in after-hours trading after closing down over 2.8 percent Tuesday. Shares climbed 7.87 percent to $90.42.