Ulta Beauty Breaks Above Its 200-sma Following earnings; Announces CFO Succession Plan

Ulta Beauty, the nation's largest specialty beauty retailer, released its financial results for the third quarter (Q3) of the fiscal year. 

The company reported earnings per share (EPS) of $5.07, surpassing the analyst estimates of $4.96. Net sales for the quarter reached $2.49 billion, showing a 6.4% year-over-year increase, and beating the estimated $2.47 billion mark. 

Ulta Beauty's comparable sales saw a growth of 4.5% during Q3, which represents a decline from the exceptional 14.6% increase experienced in the same period last year. Despite the lower growth rate, the comparable sales performance still exceeded estimates, which had projected a growth of 3.31%. 

The company's gross margin for Q3 was 39.9%, slightly below the 41.2% recorded in the previous year. This decrease was driven by lower merchandise margin, higher inventory shrink, and increased supply chain costs.  Ulta Beauty saw significant growth in other revenue streams, which helped offset the margin decline. 

Ulta Beauty's merchandise inventories increased by 9.8% year-over-year to $2.32 billion, surpassing the estimated $2.18 billion. This rise in inventories could indicate the company's focus on expanding its product offerings and meeting customer demand ahead of the holiday season. 

Selling, general, and administrative (SG&A ) expenses experienced an 11% increase to $661.4 million compared to $597.2 million in the same quarter last year. This rise was primarily driven by strategic investments, higher store expenses, store payroll and benefits, and increased marketing expenses. However, lower incentive compensation partially offset the increase. 

For the full fiscal year 2023 (FY23), Ulta Beauty has narrowed its earnings per share outlook to a range of $25.20 to $25.60, compared to the previous range of $25.10 to $25.60. The company also revised its comparable sales growth to a range of 5% to 5.5%, up from the previous range of 4.5% to 5.5%. Additionally, Ulta Beauty adjusted its revenue guidance for FY23 to $11.1 billion to $11.15 billion from the previous range of $11.05 billion to $11.15 billion. 

The positive financial results and upward revisions in the company's outlook have been well-received by the market. Ulta Beauty's shares saw a significant increase of 9.8% following the release of the earnings report. The stock rallied to $457 which marks its 200-sma. It was able to break above that resistance and has pushed to $472 ahead of its conference call. 

Ulta Beauty also announced a forthcoming change in its leadership team. Scott Settersten, Chief Financial Officer (CFO), Treasurer, and Assistant Secretary, will retire on April 1, 2024, after serving the company for nearly 20 years. Settersten will be succeeded by Paula Oyibo, the current Senior Vice President of Finance, who will report directly to Dave Kimbell, Ulta Beauty's Chief Executive Officer. 

Overall, Ulta Beauty's Q3 results highlight the company's resilience in a dynamic retail landscape and strong growth potential. With a robust earnings performance and narrowed outlook, Ulta Beauty remains well-positioned to continue its success in the beauty retail industry.