What to Look for When Ulta Posts Q3 Earnings

Ulta Salon, Cosmetics & Fragrance (ULTA) is projected to report higher third-quarter earnings and revenue year-over-year after Thursday's closing bell, according to analysts.

Surveyed by FactSet, analysts are forecasting earnings of $1.37 per share on revenue of $1.1 billion. During the same quarter last year, the Bolingbrook, IL-based beauty retailer earned $1.11 per diluted share on revenue of $910.7 million.

Wall Street also expects comparable-store sales to jump 14.8% during the most recent period, according to FactSet. A year ago, Ulta reported comparable-store sales growth of 12.8%. The figure includes sales from e-commerce and stores open at least 14 months.

Last month, the company lifted its third-quarter comparable-store sales guidance to increase between 14% and 15%, up from its prior view for growth of 11% to 13%. Ulta also boosted its third-quarter earnings per share forecast to be between $1.35 and $1.38 vs. its prior outlook for earnings of $1.25 per share to $1.30 per share.

"The health of the beauty category remains very solid, Ulta's competitive position is only strengthening, and the chain is very well positioned this holiday season to capture more than its fair share of the category spend," Oppenheimer wrote in a recent analyst note.

Additionally, the firm said recent beauty data points are supportive of an attractive fundamental set up for Ulta, such as commentary from L'Oreal (LRLCY) and Estee Lauder (EL) about "very favorable trends" in the beauty category, especially makeup.

During Estee Lauder's most recent quarter, the company continued the rollout of its Clinique brand at Ulta stores and introduced a curated selection of top-selling skincare and makeup products in 30 Ulta locations and on ulta.com. The company also commented on continued strength at multi-specialty beauty retailers.

"Clinique business in North America increased in makeup and skin care, driven by higher sales in specialty-multi retailers, online and in select department stores," CEO Fabrizio Freda said on Estee Lauder's first-quarter conference call early this month.

Oppenheimer noted it has seen significant volatility in Ulta shares over the past several quarters. "Historically, these pullbacks have represented attractive buying opportunities," the firm, which rates the stock "outperform," contended.

Shares of Ulta were lower by 0.06% to $261.44 in early-afternoon trading on Tuesday. The stock has run up more than 41% year-to-date.

As of October 29, the company operated 949 retail stores in 48 states and Washington, DC. 

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