Beauty & the Beats: Ulta Set to Outperform Consensus, Analyst Paints a Pretty Picture

Telsey advisory analyst Dana Telsey reiterated an Outperform rating on the shares of Ulta Beauty Inc ULTA with a price target of $600.
The company will report 1Q23 earnings on Thursday, May 25, after the market close.
On the topline, the analyst expects a sales growth of 12.8% Y/Y to $2.646 billion, which compares to the consensus of $2.621 billion while maintaining the EPS estimate of $6.86 versus $6.30 last year.
The analyst looks for a gross margin contraction of 30 basis points Y/Y to 39.8%, which is slightly below the consensus of 40.0%, and an operating margin contraction of 130 basis points in the quarter to 17.4%, in line with the consensus.
ULTA plans to open 25-30 net new stores, a moderation from its prior target of 50 annually, reflecting project delays related to real estate and construction issues and supply chain disruptions, noted the analyst.
The company’s strong FY22 performance showed not only the strength of its operating model but also the resiliency of the beauty category, which recorded yet another year of strong growth.
The momentum, the analyst believes, will continue in FY23, supporting an encouraging outlook for the year ahead.
The analyst said the recovery in the beauty category remains strong, with ULTA continuing to lead the way given its compelling assortment and strong and improving digital/omnichannel presence.
Price Action: ULTA shares are trading lower by 1.18% at $485.21 on the last check Monday.
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