Ulta Beauty Inc (NASDAQ:ULTA) shares gained more than 8% premarket as the beauty retailer reported stronger-than-expected financial results for the fourth quarter.
Earnings per share of $8.46 beat the consensus of $7.14, while revenue of $3.49 billion was ahead of estimates of $3.47 billion.
This drew focus from weak guidance, with Ulta projecting full-year 2025 comparable sales to be flat to 1% higher, below Street estimates for a 1.2% increase.
Ulta guided sales between $11.5 billion and $11.6 billion missing Street estimates of $11.7 billion.
It projected EPS in the range of $22.50 to $22.90, short of the consensus of $23.51.
Shares added 8.1% at $340 shortly before Friday’s opening bell in New York.
Competitive pressure
Analysts at Jefferies slashed their price target on Ulta to $354 from $412 following the report, while awarding it a ‘Hold’ rating.
“Q4 results were ahead of expectations, but macro and competitive pressures drove full-year guidance below Street estimates,” they wrote in a note to clients.
They noted that in Q4, 90% of stores were impacted by one competitor and two-thirds of stores were impacted by two or more competitors.
“This level is a step up from what was shared at the October analyst day, which was 80% of stores had 1 store open within trade, and 50% had two or more,” they wrote. “The company also called out brands with expanded distribution as a drag on the business.”
New initiatives to take time
Jefferies noted management’s expectation that its new initiatives for 2025 will take time to be realized. These initiatives include the planned launch of a new marketplace to expand eCommerce presence offering a broader assortment of products to customers in a low-risk manner.
“We suspect the marketplace is a tactic to try to regain share from Amazon and the co plans to bring brands on an invite-only basis at the onset,” they wrote.
“The company will move into wellness given the increasing connection between beauty/wellness and will roll out new and emerging wellness beauty brands in its marketplace.”
The company has also initiated plans to launch in Mexico and expand to the Middle East in 2025 leveraging a franchise model, analysts highlighted.
“While the initiatives are a positive development, we are not convinced the efforts will generate enough momentum for a turnaround,” analysts wrote.