What happened

Ulta Beauty (NASDAQ:ULTA) stock trailed the market by a wide margin last month by shedding 32% compared to a 2% decrease in the S&P 500, according to data provided by S&P Global Market Intelligence.

The slump pushed shares, which had been comfortably ahead of the market's 16% increase in 2019, to modest losses on the year.

A female salon customer getting a haircut.

Image source: Getty Images.

So what

The August decline was sparked by the consumer products specialist's second-quarter earnings report. Ulta managed solid sales growth and steady profitability. However, management noted that the core makeup category that comprises over half of its sales isn't rebounding as executives had hoped it would. As a result, Ulta reduced its outlook on both the top and bottom lines.

Now what

CEO Mary Dillon and her team expressed confidence that the makeup niche will recover, but likely not until 2020 at the earliest. Without healthy growth in this segment, it will be hard for Ulta Beauty to return to its prior pace of comparable-store sales gains of around 8% to 10% and increasing operating margin. Thus, investors have scaled back their expectations for the salon and beauty products retailer.

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