Analysts were disappointed with Ulta Beauty Inc(NASDAQ: ULTA) second quarter of 2017 results leading to the stock fall of over 7.5% in today’s pre market session (as of 9:22AM EDT on August 25th; Source: Google finance).
The group reported a Net sales rise of 20.6% yoy to $1,289.9 million during the second quarter of 2017 while Comparable sales (sales for stores open at least 14 months and e-commerce sales) enhanced only 11.7% as compared to a rise of 14.4% during the second quarter of fiscal 2016. This fall in growth rate added to the investors’ concern. Moreover, for the third quarter of 2017, they expect to deliver a Comparable sales growth rate of only 9% to 11% range for the third quarter of 2017, including e-commerce sales. For full year, they expect a comparable sales growth of over 10% to 11%, despite the impact of the e-commerce business, against their earlier guidance of 9% to 11%.
Retail comparable sales rose 8.3% during the second quarter which comprises salon comparable sales growth of 7.7%.Salon sales enhanced 15.3% to $68.0 million during the period as compared to $59.0 million in the prior corresponding period. ULTA E-commerce sales surged 72.3% to $96.3 million as compared to $55.9 million in the second quarter of fiscal 2016, which is 340 basis points of the total company comparable sales rise of 11.7%. For full year, the group guided an e-commerce sales growth only in the 50% to 60% range, lower than their second quarter performance but better than their earlier guidance of 50%.
Gross profit as a percentage of net sales enhanced 40 basis points to 36.4% as compared to 36.0% in the second quarter of fiscal 2016, driven by better merchandise margins and leverage in fixed store costs.
On the other hand, given the mounting concerns over the comparable growth rate, Telsey cut the price target to $300 for the company as compared to their earlier estimates of $360. Jefferies also cut their price target to $300 from $350 despite a Buy rating. BMO Capital also downgraded their view on the stock to Market Perform while Cowen guided investors to buy on dips.