Ulta Beauty Earnings: 3 Things To Watch

Ulta Magnificence (NASDAQ:ULTA) has just a few large inquiries to reply for buyers this week. On Thursday, Dec. 2, the wonder merchandise and spa companies large will announce outcomes for its fiscal third quarter whereas issuing a big-picture outlook for the important thing vacation procuring interval forward.

Wall Road is optimistic concerning the chain’s prospects for closing out 2021 on a powerful observe regardless of challenges associated to rising prices and provide chain bottlenecks. However it’s much less clear how Ulta will reach an more and more digital promoting panorama given its conventional power at serving to prospects experiment with magnificence merchandise earlier than buying them.

With that greater image in thoughts, let us take a look at three metrics price watching in Ulta Magnificence’s upcoming earnings report.

Picture supply: Getty Pictures.

1. Accelerating rebound

Three months in the past, Ulta shocked buyers by revealing accelerating demand progress within the magnificence business. Gross sales jumped to $2 billion from $1.2 billion a yr in the past and $1.7 billion in the identical interval in 2019. That success was powered by usually robust promoting situations but in addition by a quicker rebound within the make-up, skincare, and hair care niches. Ulta Magnificence introduced hovering buyer visitors each on-line and in its shops via late July.

We’ll study on Thursday whether or not these hopeful tendencies carried on into the Q3 interval, which runs via late October. Most buyers who observe the inventory are in search of gross sales to rise by 17% to $2.6 billion regardless of rising COVID-19 case ranges via a lot of the quarter.

2. Making extra earnings

Ulta’s up to date progress targets indicate modest gross sales progress via 2024 due to the mixture of roughly 4% annual positive aspects in same-store gross sales, plus the addition of roughly 50 new shops annually. Whereas buyers might need been hoping for quicker positive aspects, the earnings outlook is considerably brighter.

Ulta is focusing on an working margin of at the least 13% this yr, and administration believes they will enhance that metric to as excessive as 14% over the subsequent few years. Success right here would permit earnings per share to rise at a double-digit compound annual progress price (CAGR). However it depends upon Ulta efficiently conserving stock low with out lacking out on altering demand tendencies.

3. The brand new outlook

Ulta Magnificence raised its 2021 outlook in every of the final two quarters, and Thursday’s report would possibly embody one other hike to that forecast. At present, executives are focusing on gross sales between $8.1 billion and $8.3 billion, with an working margin of round 13%. These metrics would translate into earnings per share of between $14.50 and $14.70.

The larger issue to look at over Ulta’s potential hike to these short-term forecasts is whether or not the chain’s strategic shift is paying off. The corporate is not constructing as many large-format shops and is investing closely on digital promoting companies.

These strikes ought to assist increased earnings and decreased monetary threat, probably on the expense of quicker gross sales progress. However that is perhaps a gorgeous trade-off for buyers in search of an environment friendly retailing enterprise that may broaden earnings via a variety of promoting situations. The 2021 yr will seemingly set data on this rating, however Ulta Magnificence is positioning itself for steadier annual returns in 2022 and past.

This text represents the opinion of the author, who might disagree with the “official” suggestion place of a Motley Idiot premium advisory service. We’re motley! Questioning an investing thesis — even considered one of our personal — helps us all suppose critically about investing and make choices that assist us turn into smarter, happier, and richer.

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