Higher prices at the checkout don’t deter shoppers from stocking up on makeup and skincare at Ulta Beauty.
After beating Wall Street estimates to hit highs and lows in the third quarter, the Bolingbrook, Ill.-based beauty retailer has once again raised its full-year outlook despite rising inflation and fears that the United States may fall into a recession next year.
Ulta is also encouraged by the sales trends it has seen so far this crucial holiday season, despite jitters in the wider retail world, with major companies including Target, with which it has a partnership, lowering their forecasts.
“While predicting holiday shopping patterns this year is challenging, I am optimistic about the opportunity for Ulta Beauty this holiday season,” said Dave Kimbell, chief executive officer of Ulta Beauty, during an analyst call.
Chief financial officer Scott Settersten added that Ulta is pleased with the sales trends seen over the Thanksgiving holiday shopping weekend, including Cyber Monday.
Net sales increased 17.2% to $2.3 billion in the 13 weeks ended October 29, primarily due to the positive impact of the continued resilience of the beauty category, increases in retail prices and the impact of new brands and product innovation compared to the third quarter of fiscal 2021, the retailer said. Analysts polled by Factset were expecting $2.2 billion.
Within this, sales of cosmetics increased by 44%, hair care by 21%, skin care by 16%, perfumes and bathing by 12%, services by 4% and accessories by 4%. 3%. Ulta also increased market share in prestige beauty, compared to the same quarter a year earlier, although mass generally outperformed prestige.
In skincare, Drunk Elephant, Supergoop, Good Molecules, The Ordinary, Hero Cosmetics and La Roche-Posay performed well for the quarter. In makeup, its largest category, brands like Fenty and Rem Beauty drove sales during the quarter.
Net income increased 27.5% to $274.6 million. Diluted earnings per share increased 35.5% to $5.34. Analysts had penciled in $4.15.
For the full year, net sales are expected to be in the range of $9.95 billion to $10 billion, up from the previous estimate of $9.65 billion to $9.75 billion. Diluted EPS is expected to be in the range of $22.60 to $22.90, up from previous guidance of $20.70 to $21.20.
“In a challenging macro environment, the Ulta Beauty team delivered another outstanding quarter, with strong results and growth across all major categories and channels,” Kimbell noted. “Our third quarter results reflect the sustained resilience of the beauty category and the strong emotional connection and loyalty we have cultivated with our guests.”
He emphasized that its strong product offering in terms of mass and prestige puts Ulta in a strong position in the face of a potential economic downturn. “Although it’s hard to know for sure if we’re starting to see consumers compromise – being the only beauty retailer offering a wide variety of price points, from entry-level mass to high-end luxury and everything in between , Ulta Beauty is uniquely positioned to capture any consumer shifts within price ranges in the beauty category.
Settersten added, however, that the company is in “uncharted territory right now” in terms of pricing.
“The percentage of our assortment where we’ve seen increases and the depth of those increases is something we’ve never experienced in all the years here at Ulta Beauty. So we’ll roll back some of that next year and it’s yet to be seen how the consumer will react to that over the longer period of time,” she said.