Back to top

Image: Bigstock

Ulta Beauty (ULTA) Q4 Earnings Top Estimates, Sales Down Y/Y

Read MoreHide Full Article

Shares of Ulta Beauty, Inc. (ULTA - Free Report) declined 7.6% in the after-market trading session on Mar 11, after it released fourth-quarter fiscal 2020 results. Although the top and the bottom line beat the Zacks Consensus Estimate, both metrics declined year over year. Management highlighted that the company’s performance continues to be adversely impacted by the COVID-19 pandemic.

While store traffic continues to remain challenged, the company’s digital channel has been witnessing growth. The company plans to continue investing toward boosting omni-channel capabilities. In this context, it is particularly excited regarding its partnership with Target Corporation (TGT - Free Report) . Apart from these, management is on track with business investments to drive market share, including boosting assortments. It is also on track with efforts to restructure costs.

Shares of this Zacks Rank #3 (Hold) company have rallied 30.8% in the past three months compared with the industry’s growth of 13.1%.

 

Quarterly Numbers

Ulta Beauty posted adjusted earnings per share (EPS) of $3.41 compared with $3.83 reported in the year-ago quarter. Nevertheless, the bottom line surpassed the Zacks Consensus Estimate of $2.27 per share.

Net sales of this beauty retailer fell 4.6% year over year to $2,198.7 million. The Zacks Consensus Estimate stood at $2,066 million. Comparable sales or comps fell 4.8% against 4% growth recorded in the prior-year quarter. Comps takes into account stores that were open for at least 14 months, including stores temporarily closed due to the pandemic as well as e-commerce sales. During the quarter under review, the company registered decline in transactions of 12.2%, partly made up by a rise of 8.3% in average ticket.

Gross profit dropped 4.4% to $771 million. Gross margin rose 10 basis points (bps) to 35.1% owing to improved merchandise margins driven by lower promotional activity and merchandising strategies.  These were partially offset by channel mix shifts and deleverage in fixed costs due to lower sales.

SG&A expenses fell 0.3% to $514.1 million. SG&A expenses (as a percentage of sales) increased 100 bps to 23.4% due to increased marketing expenses, higher corporate expenses, personal-protective equipment, COVID-related expenses and the deleverage of variable store expenses due to lower sales.

Operating income fell from $287.8 million to $224.3 million. Operating margin contracted from 12.5% to 10.2% in the quarter. Adjusted operating income declined 11.5% to reach $254.7 million. Adjusted operating income margin was 11.6%.

Energizer Holdings, Inc. Price, Consensus and EPS Surprise

 

Energizer Holdings, Inc. Price, Consensus and EPS Surprise

Energizer Holdings, Inc. price-consensus-eps-surprise-chart | Energizer Holdings, Inc. Quote

 

Other Updates

Ulta Beauty ended the quarter with cash and cash equivalents of $1,046 million. Net merchandise inventories came in at $1,168.2 million. Average inventory per store fell 10.4% year over year. Stockholders’ equity at the end of the quarter stood at $1,999.5 million.

Net cash provided by operating activities was $810.4 million for fiscal 2020.

Additionally, the company repurchased shares worth $41.9 million during the fourth quarter. During fiscal 2020, the company repurchased 474,794 shares for $114.9 million. As of Jan 30, 2021, the company had $1.5 billion worth shares remaining under its $1.6 billion buyback program announced last year.

Ulta Beauty’s capital expenditures amounted to $152 million in during fiscal 2020. For fiscal 2021, capital expenditures are expected in the bracket of $200-$250 million

During the fourth quarter, the company opened two new stores, thereby ending fiscal 2020 with 1,264 stores. In fiscal 2021, the company plans to open approximately 40 stores along with carrying out 21 store remodels and relocation projects.

Outlook

With COVID-19 vaccines being rolled out, management expects its business to gradually strengthen in fiscal 2021. However, a significant portion of the year is likely to continue being adversely impacted by masking requirements as well as social distancing.

That said, the company expects revenues in the range of $7.2-$7.3 billion in fiscal 2021, which suggests an increase from $6.2 billion reported in fiscal 2020. Additionally, comps growth is expected in the range of 15-17%. Further, management expects operating margin to be around 9% of sales. Growth in operating margin is likely to be driven by expansion in gross margin. Earnings are expected in the range of $8.85-$9.30 per share.

Some Key Picks

Abercrombie & Fitch Company (ANF - Free Report) , with a Zacks Rank #1 (Strong Buy), has a long-term EPS growth rate of 18%. You can see the complete list of today’s Zacks #1 Rank stocks here

Tapestry, Inc. (TPR - Free Report) , with a Zacks Rank #2, has a long-term EPS growth rate of 10%.

5G Revolution: 3 Stocks to Make Your Move

With super high data speed, it will make current cell phones obsolete and unlock the full potential of big data, cloud computing, and artificial intelligence. In the next few years this industry is predicted to create 22 million jobs and a stunning $12.3 trillion in revenue.

Today you have an historic chance to pursue almost unimaginable gains like Microsoft, Netflix, and Apple in their early phases. Zacks has released a Special Report that reveals our . . .

  • Smartest stock for 5G telecom
  • Safest investment in 5G hardware
  • Single best 5G buy of all!

Download now. Today the report is FREE >>

Published in