Despite Strong Q2 Beat, Ulta (ULTA) Tumbles 5% on Weak Outlook

On Friday, shares of beauty retailer Ulta Salon Cosmetics & Fragrance ULTA are tumbling, down over 5% in morning trading after the company reported its fiscal 2016 second quarter results on August 25.

Ulta reported its seventh straight quarter of double-digit sales growth, with net sales increasing 21.9% to $1.069 billion in the quarter. Diluted earnings per share came in at $1.43, surging past the Zacks Estimate of $1.39 per share and reflecting a profit of $90 million.

 Comparable sales rose 14.4% compared to an increase of 10.1% in the second quarter of fiscal 2015. This growth was driven by a 9.7% in transactions and a 4.7% increase in average ticket.

Salon sales increased 14.3% to $59 million, and e-commerce sales grew 54.9% to $55.9 million, representing 180 basis points of the total company comparable sales.

“The Ulta Beauty team achieved another quarter of excellent top and bottom line performance, while making significant progress on many elements of our growth strategy,” said Mary Dillon, Chief Executive Officer.

“Our second quarter results reflect a strong pipeline of newness and innovation in merchandising, progress in growing our brand awareness, major milestones related to our loyalty program, continued rapid growth in our e-commerce business, and successful execution of our supply chain investments,” she continued.

Looking ahead, Ulta said it now expects revenues in the range of $1.072 billion to $1.090 billion for the third quarter. Diluted earnings per share are estimated to be in the range of $1.25 to $1.30, while comparable sales, including e-commerce sales, are expected to rise 11% to 13%.

Ulta’s Q3 earnings outlook is most likely the reason for its stock’s downward movement, as it seems to offset a solid earnings beat in the second quarter.

Before the company reported its results, Zacks’ David Bartosiak looked into some potential options trades for investors looking to make a play on Ulta. Check it out below:

Currently, ULTA is a Zacks Rank #2 (Buy) stock, and has gained over 77% over the past 12 months.

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