Beauty Is Pain To The Pocketbook: Ulta Posts Q3 Earnings Beat, Raises Prices And Outlook

Ulta Beauty Inc ULTA raised its outlook and beat analyst expectations for quarterly earnings and sales as consumers continue to restock their makeup bags despite paying more for products.

The cosmetics company paid $5.34 per share, on revenues of $2.34 billion, ahead of the expected $4.15 per share on revenues of $2.21 billion.

Read on for how analysts at Telsey Advisory Group and Guggenheim Research reacted to the news.

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The Telsey Analyst

“Incorporating the strong third-quarter results and our expectations for continued momentum, we are raising our estimates,” Telsey Advisory analyst Dana Telsey wrote in a note to investors Friday. “We now look for FY23 sales of $10.01B (from $9.77B previously), up 15.9% YoY vs. 13.2% prior. Our EPS estimate goes to $22.90 for the full year, from $21.33 previously.”

Telsey Advisory rose its price target on Ulta from $510.00 to $575.00 and gave an outperform rating on the stock.

In conjunction with third-quarter earnings, Ulta raised its 2022 outlook for net sales to $9.95-10 billion vs. $9.65-9.75 billion, and EBIT margin to 15.50-15.60% from 14.60-14.80%, and EPS to $22.60-22.90 from $20.70-21.20.

Ulta CEO Dave Kimbell says consumers continue to decide to spend money on beauty products, despite contending with rising prices.

For example, from October 2021 to 2022, Consumer Price Index data shows that cosmetics prices spiked 8.14%.

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The Guggenheim Analyst

In regards to Ulta raising its outlook, “At face value, this upward revised outlook carried a 45% incremental margin profile, exceeding ULTA's gross margin profile and further demonstrating how trends have meaningfully exceeded the company's internal plans,” Steven Forbes wrote in a note to investors Friday, “ULTA appears positioned to deliver an impressive 2022 performance; we raise our estimates accordingly.”

Guggenheim expects Ulta to post $9.75 billion in total full-year revenues — on the high end — and EBIT margin to 14.80%, again, on the high end.

Ulta is prepared for the Christmas season, as customers visit its stores to buy gifts and prepare for gatherings. Retailer's Chief Financial Officer Scott Settersten expressed satisfaction with the trends he observed over the Thanksgiving holiday, including Cyber Monday.

However, the CFO emphasized that the business still has important sales weeks ahead.

“The expected resilience of the beauty category as well as potential risks from shifts in consumer spending, increased points of distribution for prestige beauty and higher promotional activity,” according to Settersten, are taken into account in its fourth quarter outlook.

Before you leave, check out Ulta Beauty's quote page.