Ulta's Strong Fourth-Quarter Report Sends Shares Higher

Ulta Salon, Cosmetics, & Fragrance (ULTA -1.22%), the largest beauty retailer in the United States, has just released its fourth-quarter report to finish off fiscal 2013. The results exceeded analysts' expectations and the stock is reacting by moving higher. Let's take a look at the report to determine if we should follow the bulls by initiating positions right now or if we should wait for the shares to come down a bit.

Source: Ulta

The holiday-quarter results
Ulta released its fourth-quarter report after the market closed on March 13 and the results exceeded analysts' expectations on both lines; here's a breakdown and a year-over-year comparison:

Source: Benzinga

Source: Ulta

Ulta's earnings per share increased 9% and revenue increased 14.4% year-over-year, driven by comparable-store sales growth of 9.2%. Gross profit increased 13.1% to $293.56 million and the gross margin fell to 33.8% from 34.2% in the year-ago period; considering the promotional environment during the holiday season, it was impressive to see that the margin only declined by 40 basis points.

Also, Ulta opened 11 new stores during the quarter to bring its total store count to 675. Overall, Ulta posted a very strong quarter and I believe it was a great success given the highly competitive retail environment we experienced in November and December. 

Source: Ulta

What about the year ahead?
In the report, Ulta also provided its outlook on fiscal 2014. Here's an overview of what the company expects to accomplish:

• Earnings-per-share growth in the mid-teens percentage range
• Revenue growth in the mid-teens percentage range
• Comparable-store sales growth of 4%-6%
• Open 100 net new stores
• Generate free cash flow in excess of $100 million

A glance at the competition
Sally Beauty (SBH -0.96%) and Regis Corp (RGS -3.24%) are two of Ulta's largest competitors and both of them have recently released their quarterly results as well. Sally Beauty is a global retailer of beauty products and Regis is home to the largest chain of hair salons in North America and the United Kingdom. Here's a breakdown of what each company accomplished in the most recent quarter along with a year-over-year comparison:

Sally Beauty's first-quarter report -- Feb. 6:

Source: Benzinga

Regis' second-quarter report -- Jan. 27:

Source: Zacks

Source: Regis Corporation

Sally's earnings per share increased 9.4% and revenue increased 3.9% year-over-year, as comparable-store sales rose 2.2%. Net income actually fell from the year-ago first quarter, but the company has been repurchasing its shares at an accelerated pace and this allowed its earnings to rise.

The market reacted to the mixed results by sending Sally's shares more than 7% higher, however, this rally was short-lived and the stock now sits about 1% below its level before the report. In summary, the company posted good results, but Sally's projected growth going forward is much too low to consider it for an investment today.

Moving on to Regis, the company saw its earnings per share fall from a profit of $0.03 in the year-ago period to a loss of $0.04 and revenue declined 7.5%. Comparable-store sales remained weak with a decline of 6.2% in the quarter as the company's total guest count decreased 7.4%.

Regis' stock reacted by plummeting over 9% in the next trading session, but it has recouped these losses in the weeks since then. As the company has shown negative growth over the last few quarters, I would avoid Regis indefinitely from an investment standpoint.

The Foolish bottom line
Ulta just released quarterly results which exceeded analysts' expectations on both the top and bottom lines and pointed toward growth in the mid-teens for fiscal 2014. The market has reacted by pushing the stock higher and I believe the rally can be sustained for several weeks as it propels the shares back toward their 52-week high. Foolish investors should strongly consider initiating positions in this stock right now and holding onto them for several years.