Ulta Reports Strong Q2, But Revises Fiscal Year Outlook

Ulta Beauty reported strong sales growth in the second quarter but lowered previously stated annual sales guidance to refect what company officials called “headwinds” in the U.S. cosmetics market.

For the three month period ended August 4, total sales increased 12% to $1.67 billion, up from sales of $1.49 billion. Net income was $161.3 million, or $2.76 per diluted share, compared with net income of $148.3 million, or $2.46 per diluted share, in the comparable quarter the previous year.

Comparable store sales were up 6.2%.

“Our differentiated model is winning in the marketplace and we continue to invest in building the long-term capabilities that will further extend our leadership position in the dynamic beauty industries,” Mary Dillon, Ulta’s CEO, said during the company’s investor conference call.

For the six months ended August 4, total sales were $3.4 billion, up from sales of $3 billion in the first six months of 2018.

As company officials look ahead, they have revised Ulta’s forecast downward to reflect the challenges it faces in the cosmetics segment. Dillon noted that cosmetics account for about 50% of company sales but has delivered growth only in the low-single-digit range.

The category as a whole, which has been decelerating over the past two years, has experienced mid-single-digit declines in the first half of 2019, she said.

As a result, the company is now forecasting sales growth for its fiscal year of between 9% and 12%, down from the previous forecast of low double-digit growth. Comparable store sales are now expected to fall between 4% and 6% growth, down from previous guidance of 6% to 7%. Diluted earnings per share are now expected to fall in the range of $11.86 to $12.06, down from previous guidance of $12.83 to $13.03.

The company also plans to open approximately 80 new stores, execute 20 remodels and complete 270 store refreshes in the current fiscal year.