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Ulta Beauty Inc (NASDAQ:ULTA) shares are down on Friday, after the company reported a second-quarter earnings miss.
The company reported its results amid an exciting earnings season. Here are some key analyst takeaways.
Analyst Kate McShane maintained a Neutral rating while reducing the price target from $412 to $398.
Ulta Beauty reported a 1.2% decline in same-store sales, "driven by lower transactions (-1.8%) and higher ticket (+0.6%)," McShane said in a note. The company continued to lose market share in prestige, "largely driven by pressure in makeup and hair," he added.
"Factors driving the decline in comp store transactions include normalization in the beauty category and an increasingly value-focused consumer, competitive intensity in the category, operational disruption from the completion of the company's ERP transition, and incremental promotions, which did not deliver the expected sales lift in stores," the analyst wrote.
Analyst Mark Astrachan reiterated a Hold rating while cutting the price target from $475 to $385.
Ulta Beauty reported disappointing quarterly results, with EBIT of $329 million missing consensus of $344 million and weaker-than-forecast comp, which were down 1.2% versus expectations of 1.4% growth, Astrachan said. The company reduced its full-year guidance "across key metrics," he added.
The company's comp trends weakened through the second quarter, even with increased promotions, suggesting the "magnitude of challenges" it faces, the analyst stated. "Comp weakness reflects ongoing modest U.S. beauty category growth and most notably share loss, especially in prestige (hair and makeup) as competition (distribution points and promotions) pressures trends," he further wrote.
Check out other analyst stock ratings.
Analyst Simeon Siege maintained a Market Perform rating while slashing the price target from $500 to $385.
Ulta Beauty's revenues came in at around $2.552 billion, missing consensus of $2.612 billion, with a 1.2% decline comp, Siege said. "Sales decelerated throughout 2Q, with July the most challenged, though Digital accelerated throughout 2Q," he added.
Although management expects the trends witnessed in the first half to continue in the second half of the year, the 100 basis point (bps) change in EBIT margin "is largely a result of fixed cost deleverage on the worse-than-originally-expected sales trends," the analyst wrote. The company's inventory continued to grow, rising 10.1% year-on-year and 4.8% sequentially, he further stated.
Analyst Korinne Wolfmeyer reaffirmed a Neutral rating while reducing the price target from $404 to $356.
Ulta Beauty's same-store sales decline is expected to continue in the fiscal third and fourth quarters, "with spending trends worsening throughout the quarter," Wolfmeyer said. Although trends did improve in August, "the midpoint of the guidance still implies overall deceleration," he added.
"Management’s commentary around efforts to re-accelerate the business were encouraging, but we’re not out of the woods with competitive rollout and the macro, and incremental promo tactics are not proving as effective yet," the analyst wrote.
Analyst Christopher Horvers reiterated an Overweight rating and price target of $450.
The company's second-quarter comp declined by 1.2% and gross margins contracted by 100 bps, Horvers said. Management slashed 2024 guidance, implying a 2% decline in comps in the back half, at the midpoint, and operating margins of 12.7%-13.0%, he added.
"The big question going forward is whether this is a clearing event, both in terms of the FY24 outlook and ahead of ULTA's October Analyst Day (where they provide a long-term outlook), with the mgmt team (and a new CFO) chasing numbers down since the start of the year," the analyst further wrote.
ULTA Price Action: Shares of Ulta Beauty had declined by 2.33% to $359.30 at the time of publication on Friday.
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