Ulta Magnificence Earnings: The Key Takeaways

Traders had excessive hopes from earnings announcement the wrong way up magnificence (reverse -0.28%,, The salon and wonder merchandise retailer lifted its development outlook simply earlier than the beginning of the vacation season after accelerating development within the third quarter.

Ulta’s precise fourth-quarter outcomes surpassed that superior forecast, giving the corporate strong momentum into 2022. Administration forecasts confidence about development and profitability within the subsequent yr because the chain takes one other large step towards attaining $10 billion in annual gross sales.

let’s take a more in-depth look.

gross sales developments

Gross sales good points had been spectacular till the tip of January. Income at current areas rose 21% throughout the extra intense section of the pandemic to offset Ulta’s losses a yr earlier.

A buyer selecting skin care products.

Picture Supply: Getty Photographs.

That success boosted annual gross sales to $8.63 billion, or simply above the steerage vary that CEO Dave Kimbell and his group issued in early December. “Our fiscal yr ended with a better-than-expected efficiency,” Kimbell stated in a press launch, “…reflecting robust shopper demand and the energy of Ulta Magnificence’s differentiated mannequin.”

That mannequin emphasizes hands-on searching for premium skincare, hair care and make-up merchandise, all of which had been in excessive demand on the finish of 2021. Ulta Magnificence reported a ten% enhance in buyer visitors, in truth, common spend additionally elevated by 10%.

profitability win

The administration group did a terrific job securing the stock and pricing these merchandise to maintain up with inflation. Gross revenue was $1 billion, or 38% of gross sales, in comparison with 35% of gross sales a yr in the past. Ulta Magnificence’s working margin is down 15%, or barely larger than what executives had a couple of months in the past.

Chart showing a large drop in Ulta's operating margin in 2020, followed by a big rebound.

ULTA Working Margin (TTM) Information by YCharts

Ulta’s bold goal was a 13% working margin, but it surely’s now on a robust profitability and earnings path. Even the rise in labor prices was not sufficient to cease the chain of this pattern, and promoting bills held regular at round 24% of gross sales.

trying forward

Administration was cautiously optimistic concerning the subsequent yr, which ought to embody one other yr of gross sales development because the make-up and wonder merchandise market returns. Officers estimate gross sales ought to rise to about $9.1 billion.

Profitability will drop barely, however at round 14% of gross sales, it’ll stay effectively above Ulta’s long-term goal. This could translate into earnings of $18.20 per share and $18.70 per share, in comparison with final yr’s $17.98.

The chain is accelerating its new retailer growth technique, however solely modestly. Executives plan to open about 50 areas in 2022, up from 44 final yr. The annual development determine continues to be effectively under the roughly 100 shops Ulta opened a couple of years in the past.

Traders should not fear an excessive amount of concerning the tempo of that extra cautious growth, as extra demand is shifting to Ulta’s on-line channel and its in-store partnerships. goal, And, as current areas deal with extra visitors and better common spend, they’re turning into extra financially environment friendly.

All of these elements level to continued robust returns for the traders who keep this profitable development inventory.

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