Beauty & the Beats: Ulta Set to Outperform Consensus, Analyst Paints a Pretty Picture

  • Telsey advisory analyst Dana Telsey reiterated an Outperform rating on the shares of Ulta Beauty Inc ULTA with a price target of $600.
  • The company will report 1Q23 earnings on Thursday, May 25, after the market close.
  • On the topline, the analyst expects a sales growth of 12.8% Y/Y to $2.646 billion, which compares to the consensus of $2.621 billion while maintaining the EPS estimate of $6.86 versus $6.30 last year.
  • The analyst looks for a gross margin contraction of 30 basis points Y/Y to 39.8%, which is slightly below the consensus of 40.0%, and an operating margin contraction of 130 basis points in the quarter to 17.4%, in line with the consensus.
  • ULTA plans to open 25-30 net new stores, a moderation from its prior target of 50 annually, reflecting project delays related to real estate and construction issues and supply chain disruptions, noted the analyst.
  • The company’s strong FY22 performance showed not only the strength of its operating model but also the resiliency of the beauty category, which recorded yet another year of strong growth.
  • The momentum, the analyst believes, will continue in FY23, supporting an encouraging outlook for the year ahead.
  • The analyst said the recovery in the beauty category remains strong, with ULTA continuing to lead the way given its compelling assortment and strong and improving digital/omnichannel presence.
  • Price Action: ULTA shares are trading lower by 1.18% at $485.21 on the last check Monday.
  • Photo via Wikimedia Commons
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