Please ensure Javascript is enabled for purposes of website accessibility

Why Ulta Salon, Cosmetics & Fragrance Stock Soared Today

By Timothy Green - May 27, 2016 at 12:38PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The beauty retailer reported the strongest comparable-sales growth in its history as a public company.

Image source: Ulta Salon, Cosmetics & Fragrance.

What: Shares of Ulta Salon, Cosmetics & Fragrance (ULTA -0.27%) jumped on Friday after the company reported its first-quarter results. Ulta beat analyst estimates across the board, with comparable sales growing at a breakneck pace. At 11:15 a.m. EDT the stock was up about 9.5%.

So what: Ulta reported quarterly revenue of $1.07 billion, up 23.7% year over year and about $40 million higher than the average analyst estimate. Retail comparable sales rose 13.9% year over year, while e-commerce sales surged 38.8%. Total comparable sales, which includes e-commerce sales, rose 15.2%. Traffic rose 11%, while average ticket rose 4.2%.

Earnings per share came in at $1.45, up 39.4% year over year and $0.16 better than analyst expectations. Higher revenue and a 150 basis-point improvement in gross margin drove Ulta's earnings beat. Operating margin rose to 13.7%, up from 12.4% during the same period last year.

In addition to reporting positive results, the company raised its guidance for the full year. Comparable sales growth is now expected to be roughly 10% to 12%, up from a previous range of 8% to 10%. The company aims to grow per-share earnings by a low-twenties percentage, up from previous guidance calling for an 18% to 20% increase.

Now what: With much of the retail industry in a funk, Ulta's first quarter delivered in a big way. The company plans to open about 100 new net stores this year, increasing its square footage by about 11%. Combined with rapid comparable sales growth, Ulta expects revenue to grow by a high-teens percentage this year.

Ulta CEO Mary Dillon explained the elements driving the company's success. "Several positive factors are coming together to drive the momentum in our business, exemplified by the best comparable sales growth in our history as a public company. These include healthy consumer demand in the beauty category, our unique format and offering which are supporting sustained share gains, and effective collaboration across the enterprise to ensure strong execution of our growth strategies."

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Ulta Beauty, Inc. Stock Quote
Ulta Beauty, Inc.
ULTA
$390.57 (-0.27%) $-1.06

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
317%
 
S&P 500 Returns
112%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/30/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.