Ulta Salon (NASDAQ:ULTA) will release its quarterly report on Thursday, and investors expect more of the solid growth that the salon and beauty-products retailer has consistently delivered for years. Having largely dispatched its smaller salon and beauty-retail competitors, Ulta is in a strong position, but it still has to handle challenges from broader-based retailers Amazon.com (NASDAQ:AMZN) and Target (NYSE:TGT) to grab up a larger share of the lucrative cosmetics market.

Ulta Salon seems like a simple concept, with the obvious appeal of allowing shoppers to make a single trip to visit a salon while also stocking up on the products they need for home use. Ye, behind the apparent simplicity of that concept is Ulta's near-flawless execution in its store operations, encouraging repeat visits and customer loyalty that will be the retailer's most effective weapon against price-based competition from Amazon and Target. Let's take an early look at what's been happening with Ulta Salon over the past quarter. and what we're likely to see in its report.

Stats on Ulta Salon

Analyst EPS Estimate

$0.74

Change From Year-Ago EPS

25%

Revenue Estimate

$622.03 million

Change From Year-Ago Revenue

23%

Earnings Beats in Past 4 Quarters

4

Source: Yahoo! Finance.

How will Ulta Salon earnings grow this quarter?
In recent months, analysts have had mixed views on Ulta Salon earnings. They cut their October-quarter estimates by $0.02 per share, but they've boosted their calls for both the current fiscal year and next year's earnings. The stock has kept climbing higher, rising 25% since late August.

Ulta kept its positive momentum going early in the quarter, reporting July-quarter results that impressed investors. Same-store sales gains of 8.4% helped revenue soar 25% from year-ago levels, and earnings climbed at an even faster 28% pace, showing that Ulta is doing the most it can with the sales it brings in. Even somewhat tepid earnings guidance for the October quarter wasn't enough to rein in investor optimism, as the stock soared 16% on the news.

One source of potential trouble for Ulta could come from retailers seeking to encroach on its lucrative business lines. Clearly, Amazon has no ability to offer brick-and-mortar salons, and it's unlikely that Target or other big-box retailers will make a large push in that direction. Yet if they can poach the beauty-products side of the business, Ulta could suffer a big loss of its competitive advantage in combining its salon services and beauty products under one roof.

Still, Ulta has worked hard to hang on to its business. The company has been opening new stores to try to boost store counts by 10% in the second half of the fiscal year, and it has already remodeled most of its existing stores to an updated format. Ulta's loyalty program encourages repeat business, and the company counts 12 million customers among its ranks. Moreover, Ulta is hitting back at Amazon on its home turf, with substantial gains in e-commerce sales leading Ulta to redesign its website. With Ulta's much wider assortment of products, it's hard to envision Target gaining enough traction in the space to provide a substantial challenge.

In the Ulta Salon earnings report, watch to see if the company manages to keep its growth trajectory at the pace investors want to see. As popular as the stock has been, any shortfall could lead investors to question whether Ulta should keep trading at the valuation it has so richly deserved in the past.

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Fool contributor Dan Caplinger has no position in any stocks mentioned. You can follow him on Twitter @DanCaplinger. The Motley Fool recommends Amazon.com and Ulta Salon. The Motley Fool owns shares of Amazon.com and Ulta Salon. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.