Yahoo Finance Ulta Beauty (ULTA) Cuts FY24 View Despite Q1 Earnings Beat
Ulta Beauty, Inc. ULTA posted first-quarter fiscal 2024 results, wherein both top and bottom lines beat the Zacks Consensus Estimate, and sales increased year over year. The company’s performance amid a dynamic operating landscape reflects its focus on transformational agenda, responsiveness to evolving market trends and expense management.
Management remains positive about the resilience of the beauty space and the company’s solid differentiated model. However, it curtailed its net sales, comparable sales, operating margin and bottom-line guidance as it expects fiscal first-quarter operating challenges to persist.
Quarterly Numbers
Ulta Beauty reported an EPS of $6.47 in the quarter, which beat the Zacks Consensus Estimate of $6.19. However, the bottom line declined from $6.88 in the year-ago period.
Ulta Beauty Inc. Price, Consensus and EPS Surprise
Ulta Beauty Inc. price-consensus-eps-surprise-chart | Ulta Beauty Inc. Quote
Net sales of this beauty product retailer advanced 3.5% year over year to $2,725.8 million compared with the Zacks Consensus Estimate of $2,716 million. The uptick can be attributed to higher comparable sales, contributions from new stores, and increases in other revenues.
Comparable sales (sales for stores open for at least 14 months and e-commerce sales) jumped 1.6%. Our estimate for comparable sales growth stood at 2.5% for the fiscal first quarter. Comparable sales growth was driven by a 1.3% improvement in transactions and a 0.3% rise in the average ticket.
The gross profit advanced 1.4% to $1,069.8 million. The gross profit, as a percentage of net sales, was 39.2%, down 80 basis points year over year due to reduced merchandise margins and increased inventory shrink, somewhat compensated by higher other revenues. Our model suggested a gross margin contraction of 40 bps to 39.6%.
SG&A expenses rose 8.8% to $665.9 million. As a percentage of net sales, SG&A expenses were 24.4%, up 120 bps from the 23.2% reported in the year-ago quarter due to elevated corporate overheads for strategic investments, increased payroll and benefits, and escalated store costs. We expected the metric to expand 160 bps to 24.8% in the quarter under review.
The operating income decreased 9.3% to $400.9 million. The operating margin contracted 210 bps to 14.7%.
Other Updates
Ulta Beauty ended the quarter with cash and cash equivalents of $524.6 million. Net merchandise inventories were $1.9 billion at the end of the reported quarter. Stockholders’ equity at the end of the quarter stood at $2,300.7 million. Net cash provided by operating activities was $159.3 million for the 13 weeks ended May 4, 2024.
The company repurchased 588,004 shares for $285.1 million in the quarter. As of May 4, 2024, Ulta Beauty had shares worth $1.8 billion left under its $2-billion buyback program announced in March 2024. Management expects to buy back shares worth $1 billion in fiscal 2024. For fiscal 2024, the capital expenditure is expected to be $415-$490 million.
In the reported quarter, Ulta Beauty introduced 12 stores, relocated one and shuttered two. The company ended the fiscal first quarter with 1,395 stores totaling 14.6 million square feet. For fiscal 2024, ULTA expects 60-65 net new stores, along with 40-45 store remodeling and relocation projects.
Guidance
Ulta Beauty expects fiscal 2024 net sales of $11.5-$11.6 billion compared with the earlier mentioned $11.7-$11.8 billion. The company reported net sales of $11.2 billion in fiscal 2023.
Comparable sales are expected to rise 2-3%, down from the 4-5% stated earlier. Management expects an operating margin between 13.7% and 14% compared with the previously mentioned 14-14.3%.
For fiscal 2024, earnings are envisioned to be $25.20-$26 per share, lower than the earlier stated $26.20-$27. Ulta Beauty’s earnings came in at $26.03 per share in fiscal 2023.
This Zacks Rank #3 (Hold) stock has tumbled 20% in the past six months against the industry’s growth of 12.4%.
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