Despite positive Q2 results, Ulta Beauty’s stock falls amid cost concerns

Ulta Magnificence, Inc. (NASDAQ: ULTA), a number one retailer of cosmetics and private care merchandise, has reported stronger-than-expected outcomes for the second quarter of fiscal 2025, benefitting from development throughout enterprise segments and continued retailer growth. Inspired by the constructive end result, the administration raised its full-year gross sales and earnings steering. Nonetheless, the inventory declined quickly after the announcement, and the losses deepened within the following session.

Inventory Dips

In after-hours buying and selling, the inventory dropped beneath the $500 threshold, halting its current streak of regular features. Pre-earnings, it was buying and selling round 24% above the degrees seen at first of the 12 months. It seems that weak margin efficiency amid value escalation and uncertainties over shopper demand dampened investor confidence. It’s price noting that promoting, normal, and administrative bills rose 15% in the latest quarter.

The corporate mentioned it’s making progress within the Ulta Magnificence Unleashed turnaround technique, however stays cautious about how shopper demand could evolve within the second half of the 12 months. Going ahead, a possible development driver would be the lately acquired House NK enterprise, a UK-based specialty magnificence retailer that enabled Ulta Magnificence to enter the fast-growing UK market.

Key Metrics

Web gross sales elevated to $2.79 billion within the second quarter from $2.55 billion in the identical interval of fiscal 2024. Comparable retailer gross sales rose by 6.7%. Second-quarter internet earnings moved as much as $260.9 million or $5.78 per share from $252.6 million or $5.30 per share within the corresponding quarter a 12 months earlier. Each earnings and the top-line exceeded Wall Avenue’s expectations, marking their seventh beat in a row.

Commenting on the outcomes, Ulta Magnificence’s CEO Kecia Steelman mentioned, “Efficiency within the second quarter was fueled by the power of our core enterprise, reflecting our dedication to getting again to the fundamentals, improved in-store execution, and elevating our go-to-market method via operational excellence, advertising management, and compelling merchandising and innovation. Tighter collaboration and planful coordination throughout our discipline, advertising, and merchandising groups is having a tangible affect. We proceed to make progress in advancing our model constructing and digital, and personalization efforts.

Steerage

The Ulta Magnificence management raised its full-year 2025 gross sales steering to the vary of $12.0 billion to $12.1 billion from the earlier forecast of $11.5-11.7 billion. It expects FY25 comparable retailer gross sales to develop within the 2.5-3.5% vary, vs. the sooner development projection of 0-1.5%. Full-year earnings per share steering has been raised to the vary of $23.85 to $24.30 from $22.65-23.20.

On Friday, Ulta Magnificence’s shares traded decrease all through the session, extending the post-earnings downturn. The common inventory value for the final 52 weeks is $412.18.