Investors traded Ulta Beauty's (NASDAQ:ULTA) stock lower before market open Friday following the cosmetics and personal care company's third-quarter earnings results. While Ulta's comparable sales, or comps, were slightly better than expected and it delivered a positive earnings per share (EPS) surprise for the quarter, revenue missed consensus forecasts. Additionally, its fourth-quarter guidance predicts significantly worsening comps rather than improvement.

Investors and analysts were looking forward to the possibility of renewed growth before the release. Instead, results in Q3 came in mixed, as the following chart shows, using Wall Street analyst consensus figures from Zacks Equity Research and other outlets (negative numbers shown in parentheses):

Metric Amount Change YOY Surprise
Revenue $1.55 billion (7.8%) (0.65%)
Adjusted EPS $1.64 (26.5%) 8.6%
Comps (8.9%) 7.3%
Gross Margin 35.1% (200 bps) 4.5%
Operating Margin 8% (200 bps) 9.6%
SG&A Expense Rate 26.8% 10% bps 1.9%
# of Transactions (15.4%)
Average Ticket 7.6%

Data sources: Zacks Equity Research, Nasdaq.com, Business Wire, Seeking Alpha. YOY = year over year. EPS = earnings per share. SG&A = selling, general and administrative. bps = basis points.

A saleswoman showing cosmetics to a customer in a store.

Image source: Getty Images.

Revenue, adjusted EPS, transactions, comps, gross margin, operating margin, and number of transactions all fell, though in many cases, less than analysts expected, providing a positive surprise even though the metrics were down year over year. Expenses increased, as did the average ticket, or amount each customer spent.

Ulta Beauty's performance remains relatively weak in Q3 2020 following the impact of COVID-19 on the cosmetics and personal care business.

The market appears to be responding to Ulta's Q4 guidance in particular. Though CEO Mary Dillon struck an upbeat note by saying "we are encouraged with early holiday sales trends in November," the concrete figures she provided, "comparable store sales will decline in the range of 12% to 14%," suggest Q4 may see a decline from Q3, when comps only fell 8.9%, and any rebound remains elusive.

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