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Ulta Beauty (ULTA) earnings Q3 2022

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Shoppers line up outside of Ulta Beauty before the 6am opening on Black Friday.

Aimee Dilger | LightRocket | Getty Images

Ulta Beauty on Thursday boosted its outlook and surpassed Wall Street’s expectations for quarterly earnings and sales, as shoppers kept replenishing their makeup bags even while paying more on the food market.

CEO Dave Kimbell said as shoppers weigh their purchasing decisions and face rising prices, they’re still selecting to spend on beauty. On a call with investors, he said customer spending went up across all income levels.

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“While it’s hard to know with certainty if we’re beginning to see consumers trade down — because the only beauty retailer that provides a wide range of costs from entry-level mass to high-end luxury and every little thing in between, Ulta Beauty is uniquely positioned to capture any consumer shifts inside price points in the sweetness category,” he said.

Here’s how the corporate did within the three-month period ended Oct. 29, compared with Refinitiv consensus estimates:

  • Earnings per share: $5.34 vs. $4.15 estimated
  • Revenue: $2.34 billion vs. $2.21 billion estimated

As shoppers pick where to splurge and where to reduce, beauty has jumped out as a more resilient category. Goal, for instance, called out the category as a brilliant spot whilst it dissatisfied on third-quarter earnings and cut its holiday-quarter outlook. A lot of its big-box stores have a mini Ulta shop inside. Kohl’s, which pulled its full-year forecast, also said beauty is driving sales. It has mini Sephora shops within its stores.

At Ulta, comparable sales soared by 14.6% 12 months over 12 months. That growth comes on top of a 25.8% jump within the year-ago period and much surpasses the 8.8% increase that analysts expected for the third quarter, in accordance with StreetAccount.

Kimbell said makeup, skincare, hair care and the fragrance and bath category all delivered double-digit comparable sales growth 12 months over 12 months. He said shoppers snapped up foundation, concealers and blushes in its makeup category. They restocked skincare products to maintain up their routines, they usually tried newer brands and acquired holiday fragrance gift sets early.

Net income rose 27.5% to $274.6 million, or $5.34 per share, from $215.29 million, or $3.94 per share, a 12 months ago.

Ulta said it now anticipates full-year earnings of between $22.60 and $22.90 per share and full-year revenue of between $9.95 billion and $10 billion. That is well higher than a previous forecast of between $20.70 and $21.20 per share on revenue of between $9.65 billion and $9.75 billion.

The increased guidance also topped Wall Street expectations: Analysts had been searching for full-year projections of $21.40 earnings per share and $9.77 billion in revenue.

The retailer is estimating for the total 12 months its comparable sales will are available 12.6% to 13.2% higher than the year-ago period, versus a previous forecast of 9.5% to 10.5% growth.

Together with seeing growing sales, the corporate said its strong third quarter was also due partly to selling products at a better price point.

Ulta reported a profit margin of 41.2%, significantly above the 39.6% it reported within the year-ago period and the 39.3% that analysts had forecast, in accordance with StreetAccount estimates.

Ulta is equipped for the vacation season, a time when shoppers turn to its stores to prepare for parties and to search for gifts. Thus far, Chief Financial Officer Scott Settersten said, the retailer is pleased with trends it saw during Thanksgiving weekend, including Cyber Monday.

He acknowledged, nonetheless, that the corporate still has key sales weeks ahead. He said its fourth-quarter outlook aspects in “the expected resilience of the sweetness category in addition to potential risks
from shifts in consumer spending, increased points of distribution for prestige beauty and better promotional activity.”

As of Thursday’s close, Ulta shares are up about 15% up to now this 12 months. That compares to the S&P 500, which is down about 14% 12 months up to now.

Shares of the corporate touched a 52-week high and closed at $472.53, bringing the corporate’s market value to about $24 billion.

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