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Ulta Beauty, Inc. (ULTA), with a market cap of $17.5 billion, is a leading specialty beauty retailer in the United States. The Bolingbrook, Illinois-based company offers a diverse range of branded and private-label beauty products and services through its stores, online platforms, and mobile applications.
Shares of this beauty products retailer have significantly underperformed the broader market over the past 52 weeks. ULTA has declined 11.5% over this time frame, while the broader S&P 500 Index ($SPX) has rallied 24.3%. In 2024, ULTA's shares are down nearly 25%, compared to SPX's 17.2% YTD gains.
Zooming in further, ULTA has also lagged behind the S&P Retail SPDR's (XRT) 19.5% gains over the past 52 weeks and a 5.3% increase on a YTD basis.
Ulta Beauty has underperformed over the past year due to slowing growth in consumer demand, intensified competition from Sephora, and margin pressures from higher promotions and ongoing operational challenges like shrinkage.
Moreover, the company reported Q2 earnings results on Aug. 29, with net income of $5.30 per share and revenue of $2.55 billion, falling short of Wall Street expectations. Ulta Beauty lowered its full-year sales and profit forecasts, expecting earnings of $22.60 per share to $23.50 per share and revenue between $11 billion and $11.2 billion, citing slowing demand for higher-priced cosmetics and fragrances, as well as a decline in customer transactions.
For the current fiscal year, ending in January 2025, analysts expect ULTA's EPS to decline 2.4% year over year to $25.41. The company's earnings surprise history is promising. It beat the consensus estimates in each of the last four quarters.
Among the 26 analysts covering the stock, the consensus rating is a “Moderate Buy.” That’s based on 15 "Strong Buy" ratings, 10 "Holds,” and one "Strong Sell."
This configuration is slightly less bullish than three months ago, with 16 “Strong Buy” ratings on the stock.
On Aug. 27, Canaccord lowered its price target on Ulta Beauty to $500 and maintained a “Buy” rating, citing slowing beauty demand, increased competition with Sephora, and higher promotional activity despite healthy overall demand.
The mean price target of $460.41 represents a premium of 25.3% to ULTA's current levels. The Street-high price target of $552 implies a modest potential upside of 50.2% from the current price levels.
On the date of publication, Sohini Mondal did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
