Ulta Beauty (ULTA) stock has fallen since Thursday's close as the company reported fourth-quarter results. The report showed adjusted EPS of $8.08, compared to an estimate of $7.57. The company raised its outlook for fiscal 2024, but lowered its outlook for comparable sales and operating margin.
Jessica Ramirez, senior research analyst at Jane Hali & Associates, joins the live show to discuss the company's earnings, outlook and future performance.
Apart from introducing and expanding the skincare category, Ulta has other positive developments planned, suggests Ramirez: “They introduced a lot of luxury brands, so comparisons are very tough and price It was much higher. I think we might see some normalization of pricing this year, and in terms of that, they announced their expansion into Mexico. I think that's great. I think it's definitely a market. Sephora is out there, so it's going after its competitors. They have the following beauty. It's entry level…so I think that's still a plus for them. ”
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Editor's note: This article was written by Nicholas Jacobino
video transcript
[AUDIO LOGO]
Josh Lipton: Let's take a look at Ulta Beauty stock. The company beat expectations in the fourth quarter and raised its revenue outlook for fiscal 2024. However, the company lowered its comparable sales and operating profit margin forecasts. Jessica Ramirez, senior research analyst at Jane Hari & Associates, joins us to break down the latest results. I'm glad to see you on the program. For starters, hear Jessica's reaction to this report. What do you think about it?
Jessica Ramirez: Yeah. In fact, they had very tough numbers to keep up with in terms of growth and future results. So, after thinking about it, they came up with some very positive numbers. Overall, I think this is a year of beauty, and a year of normalcy for Ulta in particular. Again, I'm not perfect yet. I'm not surprised by the results. Once again, I think this is a good result. But apparently the streets think otherwise.
Julie Hyman: Yeah, and the company is lowering its full-year operating margin forecast, among other things. So now you have to wonder what are you spending more on or are you raising prices as much? I think you can find out more details over the phone. But what have we seen trend-wise?
Jessica Ramirez: Yeah. So what I want to ask on the phone when it comes to color is, what's the pricing like? But again, if you look at the year-over-year trends, I think they brought in a lot of luxury brands. So these comparisons were very harsh and the prices were much higher. I think we may see a normalization of pricing this year. And specifically, we announced that we're expanding into Mexico, which I think is great. I think it's definitely a market. There's Sephora. That's why you're chasing your competitors.
And again, they have the beauty of being entry level and they also have the beauty points to go on. Again, I think that's still a plus for them.
Josh Lipton: And Jessica, they're clearly focused on the international market here as well. It appears they are forming a joint venture here to launch Ulta Beauty in Mexico next year. Here internationally, we still have a lot of runway, so what do we do?
Jessica Ramirez: Yeah. That means most of them are in the United States. As I said earlier, I think Mexico is a great market. They partner with Grupo and I think that's Axo. Again, I think that market is the beauty market. The majority of beauty sales, especially in the United States, come from the Hispanic market. So I think it's easy to enter a market like Mexico. And like I said, Sephora was there. Therefore, it is well positioned to chase competitors.
Julie Hyman: You know, Jessica, it seems like some of the current trends aren't necessarily away from makeup. But skin care is clearly a big trend area. Considering Ulta also has a major makeup business, how has it fared in this regard? Do you think they're keeping up well enough with skin care trends?
Jessica Ramirez: Yeah. If you had asked me a few years ago, I would have said they were behind the times. But they have really managed to make their skincare category truly successful and expand. If you look at their skincare category, they focus on viral trends that are making a big impact in skincare, either in terms of Korean beauty or what they call global beauty. Interest in clinical cosmetology is extremely high and is increasing. I think consumers are more interested in that. And we've seen Ulta really implement that assortment.
So when we look at what makes sense for consumers and where consumers are more concerned about beauty, we find that skin care is one of them. . And again, they increased sales in that category and profited from cosmetics. I also think the most appealing part of skin care is that it's replenishing. Therefore, once again, customers may return to their home to replenish such items.
Julie Hyman: Thank you so much, Jessica Ramirez. appreciate.
Jessica Ramirez: thank you.
