Ulta Beauty shares sank 7% in extended trading Thursday as the company fell short of second-quarter expectations and trimmed its full-year guidance after a decline in same-store sales during the most recent period.
It was the company’s first earnings per share miss since May 2020 and first revenue miss since December 2020.
Comparable sales for the second quarter fell 1.2%, compared with an 8% increase a year earlier and well below the 1.2% growth that Wall Street analysts had expected, according to StreetAccount.
“While we are encouraged by many positive indicators across our business, our second quarter performance did not meet our expectations, driven primarily by a decline in comparable store sales. We are clear about the factors that adversely impacted our store performance, and we have actions underway to address the trends,” CEO Dave Kimbell said a press release.
During the company’s earnings call, Kimbell attributed the declining sales performance to four key factors, including an “unanticipated operational disruption” due to a change in store systems as well as disappointing impact from promotions.
The company also suffered from what Kimbell described as consumers who are increasingly cautious with their spending and from heightened competition in the beauty industry. Kimbell conceded that Ulta’s market share is being challenged and said although the company maintained its share in mass beauty during the most quarter, it lost share in the prestige beauty sector driven by makeup and hair categories, according to Circana data, cited by Kimbell.
It’s not uncommon for stores to experience a short-term negative sales impact due to competitors’ openings or cannibalization by new Ulta beauty stores, but Kimbell said the scale and pace of change now has been unusual, adding that 80% of stores have been impacted.
“We know we’re still in the midst of this…these competitive pressures will likely continue into the near term, but the positive signals…in our broader business, the guest engagement, the impact of newness, the impact of our new stores, the success of our salon business, the loyalty growth, all of those factors suggest to us and give us a lot of confidence that our business continues to have underlying strength and health,” Kimbell said.
The company now forecasts full-year same-store sales in a range of flat to 2% down, compared with prior guidance of 2% to 3% growth.
“Our updated outlook for sales assumes it will take more time for our actions to change the top line trajectory and that stores impacted by multiple competitive openings will continue to be pressured,” CFO Paula Oyibo said.
Ulta also now expects full-year revenue of $11 billion to $11.2 billion, down from previous guidance of $11.5 billion to $11.6 billion, and full-year earnings per share of $22.60 to $23.50, down from a previous forecast of $25.20 to $26.
Here’s how the beauty retailer performed in the period ended August 3 compared with what Wall Street was expecting, based…
Read More: Ulta earnings Q2 2024
