Ulta Beauty (ULTA -1.72%) stock has been a standout winner in an ugly market. Shares are outperforming the S&P 500 in 2022. They're trouncing the broad market over the past year too while beating out many retail peers.
Investors were pleased with the beauty products specialist's full-year fiscal 2021 earnings report, which showed solid momentum heading into 2022. But that optimism will be tested in a few days when management issues its latest operating update and refreshes its outlook for the current fiscal year.
Let's take a closer look at what to expect in that announcement, which is set for release on Thursday, May 26.
The sales trends
The positive momentum was undeniable in Ulta's prior earnings report. Comparable-store sales jumped 21% in the three-month period ended Jan. 29, beating management's forecast.
Executives said the surge was partly thanks to an expanding beauty, skin care, and makeup industry as the pandemic threat faded and people returned to in-person interactions. Ulta's hands-on selling approach was a major asset in that environment, helping it capture market share too.
CEO Dave Kimbell credited "stronger consumer demand and the strength of Ulta Beauty's differentiated model," for driving most of the gains.
Expectations are more muted for this report as analysts see revenue rising about 11% to $2.1 billion. The key question is whether Ulta is still seeing a healthy balance between rising traffic and increased spending per visit. Each of these metrics was up about 10% last quarter.
Pricing and e-commerce
A big worry for early 2022 is that Ulta's growth will be pressured by declining e-commerce sales compared to booming results a year ago. The chain also faces supply chain issues along with pricing challenges that might reduce revenue or earnings growth.
One good metric to follow on this score is operating income, which soared to $1.3 billion, or 15% of sales, in fiscal 2021 -- up from just 4% of sales the previous year. Operating margin was around 12% before the pandemic hit, and it will likely fall in the fiscal first quarter and for the full year. But investors are still hoping that some of Ulta's margin gains during the pandemic rebound will endure.
The official fiscal 2022 forecast from management currently calls for comps to rise between 3% and 4% this year as operating margin shrinks to about 14%.
The sales and earnings outlook may see a downward revision to reflect slowing economic trends, especially given the downgrades from retail peers in recent days.
But investors will get a clearer reading of Ulta's growth potential by watching those store launch plans. The company likely aims to open at least 50 new locations in 2022 and might boost that target if comps continue trending well above pre-pandemic levels.