Ulta Beauty sales growth accelerates to 11%
The beauty retailer’s first-quarter earnings rose 15.5% to $7.74 a share.
Ulta Beauty (ULTA) reported first-quarter results that marked a sharp rebound in sales momentum, with net sales rising 11.1% to $3.2 billion. The quarter reversed a year-long deceleration in comparable-sales growth and ended a three-quarter slide in gross-margin performance, signaling that the company’s turnaround efforts are taking hold.
After a stretch of uneven demand that saw comparable-sales growth slow to 2.9% in the year-ago quarter, Ulta posted a 5.3% increase in the latest period. The gain was driven by a 3.7% rise in average ticket and a 1.6% lift in transactions, outpacing the prior year’s modest 2.9% comparable-sales growth. Gross profit margin expanded to 40.1% from 39.1% a year earlier and from 38.1% in the previous quarter, as lower inventory shrink and higher merchandise margins offset rising costs.
Revenue growth outpaced expense growth for the first time in four quarters. Operating income climbed 11.6% to $448.3 million, recovering from a 0.2% decline in the prior-year period. Operating margin held steady at 14.2%, while diluted earnings per share rose 15.5% to $7.74, accelerating from 3.5% growth in the year-ago quarter.
The rebound was broad-based. Skincare and wellness categories now account for 24% of net sales, up from 23% a year earlier, while cosmetics declined to 35% from 40%. The company also opened 18 new U.S. stores and one international location, up from six new stores in the prior-year quarter. Merchandise inventories rose 12.5% to $2.4 billion, a slight deceleration from the prior year’s 11.3% growth.
Ulta raised its full-year guidance. Operating income growth is now expected to range between 6.5% and 9%, narrowing from the prior 6% to 9% range, while diluted earnings per share guidance was lifted to $28.36 to $28.80 from $28.05 to $28.55. The company said the outlook reflects continued momentum in consumer demand and disciplined cost management.
Capital expenditures fell to $58.3 million from $79.0 million in the prior-year quarter, as the company slowed store remodels to focus on new openings. Share repurchases surged to $555.0 million from $369.8 million, with 958,323 shares bought back. Short-term debt rose to $144.9 million from $62.3 million at fiscal year-end, reflecting higher borrowings to fund the buyback.