Yahoo Finance Ulta Beauty (ULTA) Q1 Earnings & Sales Top Estimates, Rise Y/Y
Ulta Beauty, Inc. ULTA began fiscal 2023 on a solid note as the first-quarter top and bottom lines increased year over year and beat the Zacks Consensus Estimate.
Results gained from healthy store traffic, strength in member growth and improvements in key categories. Skincare remained the top-performing category, with mass and prestige delivering solid comparable sales growth due to newness and compelling social media content, among other factors.
While the operating landscape is likely to keep evolving, management remains confident about the resilience of the beauty category.
Quarterly Numbers
Ulta Beauty posted earnings per share (EPS) of $6.88 in the quarter, which includes a 14-cent gain related to stock-based compensations. The metric beat the Zacks Consensus Estimate of $6.82 and increased from $6.30 in the year-ago period.
Ulta Beauty Inc. Price, Consensus and EPS Surprise
Ulta Beauty Inc. price-consensus-eps-surprise-chart | Ulta Beauty Inc. Quote
Net sales of this beauty product retailer rose 12.3% year over year to $2,634.3 million and beat the Zacks Consensus Estimate of $2,618 million. The uptick can be attributed to higher comparable sales, solid new store performance and an increase in other revenues.
Comparable sales (sales for stores open for at least 14 months and e-commerce sales) jumped 9.3%, driven by an 11% improvement in transactions, partly offset by a 1.5% drop in the average ticket.
The gross profit advanced 12.1% to $1,054.9 million. The gross profit, as a percentage of net sales, was 40%, down 10 basis points year over year. Higher inventory shrink, reduced merchandise margins, elevated supply-chain costs and store expense deleverage were partly made up by strength in other revenues and store fixed-cost leverage.
SG&A expenses rose 22.2% to $612.1 million. As a percentage of net sales, SG&A expenses came in at 23.2%, up from 21.4% reported in the year-ago quarter. The increase was due to the deleverage of store payroll and benefits, corporate overheads and marketing expenses, somewhat compensated by the leverage of incentive compensations and store costs.
The operating income rose 1% to $442.1 million. The operating margin decreased from 18.7% to 16.8%.
Other Updates
Ulta Beauty ended the quarter with cash and cash equivalents of $636.4 million. Net merchandise inventories were $1.75 billion at the end of the first quarter of fiscal 2023. Stockholders’ equity at the end of the quarter stood at $2,018.1 million. Net cash provided by operating activities was $304.9 million in the 13 weeks ended Apr 29, 2023.
The company repurchased 541,108 shares for $285.8 million in the first quarter. As of Apr 29, 2023, Ulta Beauty had shares worth $816.5 million left under its buyback program announced in March 2022. The company anticipates a share repurchase of $900 million in fiscal 2023.
For fiscal 2023, the capital expenditure is expected in the band of $400-$475 million.
In the reported quarter, the company introduced five new stores, remodeled two and relocated one. Ulta Beauty ended the quarter with 1,359 stores totaling 14.2 million square feet.
For fiscal 2023, ULTA expects 25-30 net new stores along with 20-30 store remodeling and relocation projects.
Guidance
Ulta Beauty now expects fiscal 2023 net sales in the range of $11-$11.1 billion compared with the $10.95-$11.05 billion band expected earlier. The company reported net sales of $10.2 billion in fiscal 2022.
Comparable sales are expected to rise 4-5%. The company expects comp growth in the first half in the high-single-digit range and moderate-to-low-single-digit growth in the second half of the year.
Management expects the operating margin between 14.5-14.8% compared with the previous view of 14.7% and 15%. The revised outlook reflects an increased gross margin deleverage view, which includes the effects of increased shrink and a more competitive and promotional landscape.
For fiscal 2023, earnings are envisioned in the band of $24.70-$25.40 per share, suggesting a rise from the $24.01 per share reported in fiscal 2022.
This Zacks Rank #3 (Hold) stock has risen 6.1% in the past six months compared with the industry's 4.2% growth.
Stocks to Consider
Here we have highlighted three better-ranked stocks.
Five Below FIVE, a specialty value retailer, carries a Zacks Rank #2 (Buy) at present. FIVE has a trailing four-quarter earnings surprise of 26.3%, on average. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Five Below’s current financial-year revenues suggests growth of 16.1% from the year-ago reported figure. FIVE has an EPS growth rate of 22.3% for three to five years.
Kroger KR, a renowned grocery retailer, currently carries a Zacks Rank #2. KR has an EPS growth rate of 6% for three to five years.
The Zacks Consensus Estimate for Kroger’s current financial-year EPS suggests an increase of 6.6% from the year-ago reported figure. Kroger has a trailing four-quarter negative earnings surprise of 9.8%, on average.
The TJX Companies TJX currently carries a Zacks Rank #2. This off-price retailer has an expected EPS growth rate of 10.5% for three to five years.
The Zacks Consensus Estimate for The TJX Companies’ current financial-year EPS suggests growth of 14.5% from the year-ago reported figure. TJX has a trailing four-quarter earnings surprise of 4.4%, on average.
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