ULTA May Achieve Operating Margin Goal Earlier Than Expected

Analysts at Piper Jaffray reiterate their "overweight" rating on Ulta Salon Cosmetics & Fragrance ULTA, while raising their estimates for the company. The target price for ULTA is set to $30. ULTA posted better-than-expected Q1 results. The analysts say, “We continue to believe ULTA is one of the best-positioned concepts in our coverage to benefit from market share gains as they aim for their 1,000 door potential, and we focus on the trajectory to achieve its longer-term financial goals—which could drive EPS in excess of our current estimates… Although Ulta had preannounced its same-store sales on 4/26/10, we are encouraged to see that Ulta was able to exceed our gross margin estimate by 160 bps in reporting a 310 bps y/y increase.” “We are encouraged by positive momentum in business trends against the backdrop of what looks to be a more normalized store growth year for 2010. On that note, we believe operating efficiencies, improved productivity and the addition of new brands will likely help to achieve ULTA's longer-term 8%-9% operating margin goal earlier than expected (2012/2013) according to indications on the call,” Piper Jaffray adds. Piper Jaffray has raised its EPS estimates for FY11 from $1.08 to $1.21. More Analyst Ratings here