Ulta Beauty beats Q3 estimates

Ulta Beauty reported better-than-expected earnings for its third quarter even as its sales fell short of estimates amid ongoing weakness in a core category.

Net earnings totaled $129.7 million, or $2.25 a share, in the quarter ended Nov. 3, compared with $131.2 million, or $2.18 a share, in the year-ago period. Analysts had expected earnings of $2.13 a share. 

Net sales rose 7.9% to $1.68 billion, just missing estimates. Skincare was one of Ulta’s strongest growth categories in the quarter, with prestige, mass and suncare all delivering double-digit comps, company executives said on the chain’s earnings call with analysts. 

Comparable sales (including and e-commerce sales) increased 3.2%, driven by 2.3% transaction growth and 0.9% growth in average ticket.

“The Ulta Beauty team delivered another quarter of solid top-line performance, gross margin expansion, and EPS growth, despite the current challenges facing the U.S. cosmetics category,” said Mary Dillon, CEO. “We continue to gain market share across all major beauty categories, and we are extending our leadership position by creating stronger connections with our guests and engaging with them in better and more exciting ways.”

On the earnings call, Dillon said that that growth in the overall U.S. beauty industry continues to be constrained by softness in the makeup category. 

“We continue to believe that the headwinds facing the makeup category are largely cyclical, resulting from a lack of incremental innovation and compelling newness,” she said. “We remain confident that makeup category will return to growth, but recognize that it will take time.”

For fiscal 2019, Ulta said it now expects earnings per share between $11.93 and $12.03 versus a previous expectation of $11.86 and $12.06. 

Ulta ended the third quarter with 1,241 stores.