Ulta Beat Earnings But The Caked On Makeup Can’t Hide Its Ugly Growth Numbers

Sooo Ulta Beauty just delivered their fiscal Q3 earnings last week, and you could practically hear the collective gasp from Wall Street. Shares popped over 10% in after-hours trading, as investors, who’ve been ghosting the stock for most of the year, finally threw it a bone. Buuut, while the headlines screamed “earnings beat” —when you dig a little deeper, the story isn’t as flawless as the perfectly blended contour they sell. 

(Source: Giphy) 

In short, the retailer reported net income of $242.2 million, blowing past analyst expectations with earnings of $4.54 per share. So far so good. In addition, revenue also inched up 1.7% to $2.53 billion, thanks to a 0.6% uptick in comparable sales. Which is quite the win, especially as the company sits within a market where OG’s like Estée Lauder are struggling to keep U.S. demand afloat—every little sliver of growth looks hella good on paper. 

However, let’s not confuse survival with dominance. The grim reality is that Ulta’s comparable sales are barely moving, and the only reason this quarter looks decent is because the bar was practically set on the floor. Sure, CEO Dave Kimbell called the results “encouraging” and praised the company’s “progress” but the real translation felt something like “we didn’t completely fumble the bag.” Why well because when it came to guidance, the numbers were hardly inspiring. 

(Source: CNBC) 

Ulta barely nudged its full-year outlook, projecting net sales of $11.1 to $11.2 billion and earnings per share between $23.20 and $23.75. The comparable sales forecast? Flat to a 1% dip. And for the critical holiday quarter, the retailer expects comps to drop by low single digits. Meaning that’s not “progress.” That’s friggin’ bracing for impact. 

See, Ulta knows it can’t coast on hope, so it’s been throwing everything at the wall to keep customers engaged. New product launches, digital tools, and in-store events have been the playbook. For example, they recently rolled out a Wicked-themed makeup line, added virtual try-ons and buying guides, and hosted workshops to teach customers how to master their own blowouts. Now sure, these moves nudged customer transactions up 0.5% and ticket size by 0.1%. Progress, yes, but we’re talking crumbs in an industry that usually thrives on big wins. 

(Source: Yahoo Finance) 

What’s more is that Utla is still down -12% this year—with some of that sting coming courtesy of Warren Buffett’s Berkshire Hathaway, which dumped nearly all (see: 95% sold) its Ulta shares last quarter. Meaning, regardless of how well an earnings report is, when Grandpa Buffett decides you’re not worth holding—that’s a red flag you can’t ignore.

With that said though, even with Warren yeeting the stock from it’s portfolio, the bigger issue is the state of the beauty industry itself. Post-pandemic demand is normalizing, and inflation has shoppers ditching $50 highlighters for budget mascaras. Ulta’s management summed it up with corporate subtlety: “Economic concerns are driving a greater focus on value.” Translation: Consumers are broke, and luxury beauty isn’t a priority when groceries are eating paychecks.

(Source: Imgflip) 

In the end, Ulta isn’t circling the drain—it’s still profitable, with a projected 13% operating margin for the year. And its share buyback program is a smart play to keep investors interested. But let’s not kid ourselves: this isn’t the unstoppable juggernaut it once was. The stock’s recent bounce might feel good, but it’s more of a short-term concealer than a long-term fix (shout out to my wife for helping me with the “make-up” metaphors LOL).

Meaning until Ulta figures out how to reignite real growth (see: Oct. 2023 growth), bullish sentiment, to me, remains stuck in the planning phase. Of course, do what you will with this information, but in the meantime, place your bets accordingly. And as always, stay safe and stay frosty, friends! Until next time…

P.S. I’ll be honest, I’m not the smartest tool in the shed on a lot of things, but I do know a banger of a deal when I see one. And right now, that banger of a deal is 90% OFF Stocks.News premium. In fact, word on the street is that it’s so good, people are stepping over themselves to get a piece of our next month of alerts for PENNIES on the dollar. The bad news? We are approaching our membership limit on this INSANE offer. Meaning, if you haven’t done so yet, what are you doing? Click here to get a sniff of this absolutely-ludicrous-I-can't-believe-it's-this-cheap-deal right here… 

Stocks.News does not hold positions in companies mentioned in the article.