Shares of Ulta Beauty (ULTA 7.09%) surged on Thursday afternoon after an influential analyst team said that the coronavirus pandemic might not hit the retail sector as hard as investors had feared. As of 3 p.m. EDT, Ulta's shares were up about 16% from Wednesday's closing price.
In a new note on Thursday, Cowen analysts, led by Oliver Chen, put some of the first estimates to the impact of "social distancing" measures on retail stocks. The analysts see a sharp decline in sales in March and likely a brutal April -- but then, they wrote, a likely recovery through the summer.
Ulta wasn't the focus of their note, but it's no surprise that investors were snapping up its beaten-down shares. The company is a well-run retail chain with ample cash reserves to weather the crisis for an extended period and has so far made the right moves to protect employees, customers, and its business.
Ulta has closed all of its stores through at least March 31. Its online store remains open and will continue to offer customers the option of picking up online orders at local stores as authorities allow. Of note: CEO Mary Dillon said on Tuesday that Ulta will continue to provide pay and benefits to store employees through the shutdowns.
Those were the right moves under the circumstances. But as to what will come next, it's still hard to say. The Cowen team's note provides reasons for some cautious optimism, but take note that Ulta itself isn't guessing: The company has withdrawn its prior guidance to investors for fiscal 2020.