Ulta Beauty’s shares plummeted 7% in extended trading after the company failed to meet second-quarter expectations and revised its full-year guidance due to a decrease in same-store sales. This marked the first earnings per share miss for Ulta since May 2020 and the first revenue miss since December 2020. Comparable sales in the second quarter fell by 1.2%, which was a stark contrast to the 8% increase seen a year earlier. The company’s performance was well below the Wall Street analysts’ expectation of 1.2% growth. CEO Dave Kimbell acknowledged the decline in store performance and attributed it to several key factors, including operational disruptions, promotional impact, cautious consumer spending behavior, and heightened competition in the beauty industry.
Kimbell highlighted the challenges that Ulta is facing with regards to market share, particularly in the prestige beauty sector. The company experienced a decline in market share in the makeup and hair categories, according to data cited by Kimbell. Ulta’s market share is being threatened by competitors, and Kimbell mentioned that 80% of stores have been impacted by the changing landscape. While it is not uncommon for stores to face short-term negative impacts due to competitors’ openings or cannibalization by new Ulta stores, Kimbell emphasized that the current scale and pace of change are unusual. He also expressed confidence in Ulta’s underlying strength and health, pointing to positive signals in guest engagement, new store impact, and loyalty growth.
Ulta revised its full-year guidance, forecasting same-store sales to be flat to 2% down compared to the previous guidance of 2% to 3% growth. The company also adjusted its revenue expectations to $11 billion to $11.2 billion, down from the initial forecast of $11.5 billion to $11.6 billion. Furthermore, Ulta lowered its full-year earnings per share outlook to $22.60 to $23.50, from the previous estimate of $25.20 to $26. CFO Paula Oyibo mentioned that the updated outlook assumes more time is needed for the company’s actions to have an effect on the top-line trajectory.
Ulta’s earnings report fell short of Wall Street expectations, with earnings per share coming in at $5.30 compared to the expected $5.46, and revenue reaching $2.55 billion versus the anticipated $2.61 billion. The company reported a net income of $252.6 million, down from $300.1 million in the same quarter a year earlier. Despite the disappointing results, Warren Buffet’s Berkshire Hathaway disclosed a $266 million stake in Ulta, causing shares to surge. The stock had previously fallen by 32% in 2024 and plummeted 26% in the second quarter alone, signaling overselling. Analysts viewed this as validation of Ulta’s potential despite the recent setbacks.
CEO Dave Kimbell acknowledged the cooling beauty demand, which had impacted Ulta earlier and more severely than expected. He outlined plans to boost sales, focusing on product assortment, brand relevance, digital experience enhancement, loyalty program improvement, and promotional strategy evolution. Ulta also announced partnerships with DoorDash, plans to introduce gamification platforms, and initiatives to personalize customer shopping experiences. Kimbell identified further opportunities in relaunching Ulta’s own beauty collection, providing personalized product recommendations, and enhancing the rewards program with member-exclusive events and offers.
Ulta Beauty’s recent performance indicates a challenging period for the company, with declining sales, market share issues, and revised guidance dampening investor confidence. CEO Dave Kimbell and his team have recognized the challenges and are implementing strategies to navigate through the turbulent times. While the short-term outlook may seem uncertain, Ulta’s focus on innovation, customer engagement, and product offerings could pave the way for recovery and growth in the long run. Time will tell whether Ulta can overcome the obstacles and emerge stronger in the competitive beauty industry.