Jolly Holidays for Ulta, Outlook Up - Analyst Blog

Ulta Salon, Cosmetics & Fragrance Inc. (ULTA) recently announced sales results for the seven-week holiday period from November 14, 2010 to January 1, 2011, which spans from Thanksgiving to Christmas.

Total net sales, during this period, surged 18.4% to $310.4 million from the prior year's holiday period, owing to the company's significant holiday merchandising and marketing initiatives that delivered new products. Apart from the sales announcement, Ulta also increased its outlook.

Management pointed out that sales grew across all major categories leading to a marked improvement in results amid a sluggish economic environment. The growth in sales is attributable to improving traffic as well as slightly higher average ticket.

Comparable store sales for the 2010 holiday period increased 9.5% compared with an increase of 7.9% during the comparable period of the prior year. Over a two-year period, comparable store sales surged 17.4%.

Increased Outlook

Buoyed by its strong holiday results, Ulta raised its fourth quarter guidance for sales and earnings. The company now expects its fourth quarter fiscal 2010 net sales in the range of $463 million to $467 million compared with its previous guidance of $447 million to $456 million.

Comparable store sales for the fourth quarter of fiscal 2010 are now projected to increase in the range of 8% to 9% versus its previous expectation of 4% to 6%. This corresponds to sales guidance resulting in a two year comparable store sales rise of 14.2% to 15.2%.

Income per diluted share for the fourth quarter of fiscal 2010 is now estimated in the range of 43 cents to 44 cents, including the previously announced one penny per diluted share non-recurring compensation charge.

Adjusted income per diluted share is expected to be in a range of 44 cents 45 cents. The company's earlier guidance range for the fourth quarter was 39 cents to 41 cents, including the one penny charge, and 40 to 42 cents per diluted share on an adjusted basis.

In early December, the company posted its third-quarter 2010 adjusted earnings of 25 cents per share, which were well above of the Zacks Consensus Estimate of 20 cents. As per the bullish guidance, we expect an upward movement in the Zacks Consensus Estimate for the company.

Ulta currently retains a Zacks #1 Rank, which translates into a short-term Strong Buy rating. We are also maintaining a long-term Outperform recommendation on the stock. One of Ulta's primary competitors in the industry is Regis Corp. (RGS).

 
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