Yahoo Finance Ulta Beauty to look good; ugly losses expected at Abercrombie & Fitch
More specialty retailers release earnings Thursday, and overall it’s been a good season for names in the space. Earnings growth for specialty retailers in the S&P 500 is at 13.6%, with revenue growth of 4.1%, the highest of any retail industry. Ulta and Abercrombie & Fitch, discussed below, are not in the index.
ULTA
Ulta Salon, Cosmetics & Fragrance, Inc. (ULTA) is one specialty name that has posted incredibly strong fundamentals for the last several quarters, reaping the benefits of a growing beauty sector which has seen annual revenues increase by 2.3% for the last five years, according to IBIS World. For the first quarter, the Estimize community anticipates that Ulta will report earnings per share (EPS) of $0.95, 9 cents higher than the Wall Street consensus, and 4 cents higher than the company’s own guidance. Revenue expectations for $843.5M also surpass the Street and company guidance. This would indicate another quarter of year-over-year double-digit growth on both the top and bottom-line, something the company has been able to achieve ever since the second quarter of 2009.
The beauty retailer has done a great job at pulling back on discounting and revamping its loyalty program, both efforts which have helped to increase average order value. Other efforts to invest heavily in better messaging, more targeted promotions and employee training have also paid off. While there is certainly stiff competition in the space, with many department stores such as Kohl’s, Macy’s and J.C. Penney doubling down on their beauty efforts, Ulta is the only to offer products with a wide array of price points as well as salon services. While an awareness gap still separates it from competitors such as Sephora, the stock has done remarkably well this year, rising 20%.
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ABERCROMBIE & FITCH
Abercrombie & Fitch (ANF), on the other hand, is one specialty retailer that is not expected to do well. Very rarely does the Estimize community have a lower expectation than Wall Street, but this is the case for Abercrombie. The Estimize EPS consensus calls for -$0.36 vs. Wall Street’s -$0.34. Revenues of $729M are also below the Street’s estimate for $734M. Abercrombie is well aware of what the issues are, but can they reverse them? They’ve already gotten rid of logoed gear, which has fallen out of favor with teens, and they recently announced they were getting rid of suggestive and sexy images as part of their marketing strategy. There has also been a push to diversify stores, which have long been staffed with preppy all-American employees.
The retailer hasn’t only been struggling here in the U.S., but internationally as well, posting 11 consecutive quarters of negative same-store sales, a trend this is only being exacerbated by the stronger dollar. The stock is down around 30% this year, and could use a positive surprise when the teen retailer reports on Thursday before the bell.
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