Ulta Beauty topped Q1 earnings and revenue expectations late Thursday, as the cosmetics retailer got a boost from folks ditching their masks. UTLA stock popped.
For nearly two years, people religiously wore masks — and less makeup — to protect themselves and help stop the spread of Covid-19. During that time Ulta Beauty, like other cosmetics retailers, struggled to sell products. Because what's the point of wearing lipstick behind a mask?
As a result, Ulta Beauty earnings and revenue tumbled. ULTA shares fell as low as 124. But by the first quarter of 2021, Ulta's outlook turned rosier. The Bolingbrook, Ill-based company has posted four straight quarters of earnings growth, three of them triple-digit growth. Ulta's sales have also charged higher in the last four quarters. And ULTA stock bounced back to a new high of 438.63 intraday on April 21. Shares have since pulled back to around 400 amid an overall market downturn.
Retailers have been hit especially hard recently, with consumers spending less as stimulus money dries up. Rising inflation and continued supply-chain issues are also crimping profits among even bargain retailers like Target and Walmart.
Nevertheless, D.A. Davidson analyst Michael Baker says Ulta should fare better than most.
"One product area that stood out was beauty, even in TGT's weak results," he wrote in a May 22 note.
Baker says Ulta is "benefiting from the reopening trade." He concedes that margins will be down this year, but adds that that's already baked into estimates.
Ulta Beauty Earnings
Estimates: FactSet analysts expect Ulta Beauty earnings of $4.46 a share, a 9.6% increase from a year earlier. Sales are seen rising 9.5% to $2.123 billion. Growth rates are slowing as year-over-year comparisons become more difficult.
Consensus Metrix expects same-store sales to grow 7.3%.
Results: Ulta Beauty earnings ran up to $6.30 a share as sales grew nearly 21% to $2.356 billion. Same-store sales increased 18%.
Ulta Beauty opened 10 locations in Q1, including stores in Las Vegas and North Hollywood, Calif. It had 1,318 stores total at the end of the first quarter.
The company also updated its outlook for fiscal 2022. It sees sales of $9.35 billion to 9.55 billion vs. a prior view for $9.05 billion to $9.15 billion. It expects comps of 6% to 8% vs. a previous 3% to 4%. Ulta now sees of EPS of $19.20 to $20.10 compared to a prior estimate for $18.20 to $18.70.
Much of that full-year raise reflects Ulta's Q1 beat. But just maintaining guidance for the rest of the year is better than a lot of retailers in the current climate.
ULTA Stock
Shares gapped up 7.1% in regular trading on the stock market today and another 7% after hours to about 404. ULTA stock broke out of a cup-with-handle base on April 11, and raced all the way to a 52-week high of 438.63 before tumbling 19%, according to MarketSmith chart analysis. Shares gapped down nearly 11% on May 18, as part of the Target-led retail meltdown.
Ulta stock closed Thursday below its 50-day and 200-day lines, but is signaling a move above that key level.
The company's relative strength line has spiked up with the strong quarterly report. Ulta Beauty's RS Rating is a 72 out of a best-possible 99, while its EPS Rating is 88.
With a Composite Rating of 84, ULTA stock is ranked second in IBD's Retail Specialty industry group. ULTA stock has a D Accumulation/Distribution Rating, which demonstrates moderate selling among institutional buyers.
Among retail stocks with significant cosmetics sales, Target rose 4% Thursday and Walmart added 2.1%. Both are still down sharply in May after last week's meltdowns.
Follow Adelia Cellini Linecker on Twitter @IBD_Adelia.
