Ulta Beauty Will Survive Despite Challenges of Cyclical Lull and Changing Environment
Beauty retailer Ulta Beauty (NASDAQ: ULTA) finally gave investors a much-needed glimmer of hope last week. Its third-quarter bottom-line results came in better than expected, with same-store sales improving to the tune of 3% year over year, in line with expectations. Part of the big 11% post-earnings surge following the report has since been given back, though that's not a key cause for concern; the big gain encouraged some profit-taking once the buzz wore off. The foundation for a more prolonged recovery appears to be taking shape.
But before investors decide to plow back into the beaten-down name, they may want to take a step back and look at the bigger cosmetics picture. The entire industry is in the midst of a couple of paradigm changes, both of which are working against Ulta. Its CEO even made a point of saying as much when discussing the results.
The quarter was strong enough. Same-store sales were up 3.2%, and though the top line fell short of estimates, total revenue grew 7.9% to $1.68 billion for the three-month stretch ending in October. That, along with upped guidance, gave would-be buyers something to latch onto following decided weakness after the release of the previous quarter's figures. The past and projected numbers are also part of a bigger -- even if occasionally uneven -- growth trend.
Source Fool.com