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Insight into Ulta Beauty’s Sales Growth in Fiscal 4Q17

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Sales versus expectations

Ulta Beauty’s (ULTA) sales of ~$1.9 billion in fiscal 4Q17 were almost in line with the analysts’ consensus sales estimate. The company’s sales grew 22.6% on a year-over-year basis in fiscal 4Q17. Excluding the impact of sales from the 53rd additional week, the company’s sales grew 15.7% in fiscal 4Q17.

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Headwinds and tailwinds in fiscal 4Q17

Ulta Beauty’s (ULTA) sales growth in fiscal 4Q17 was driven by higher same-store growth, new store productivity, and the benefit of the additional week in the quarter. The company’s same-store sales grew 8.8% in fiscal 4Q17, driven by higher traffic, ticket growth, a strong January, and impressive e-commerce sales.

The company’s e-commerce sales grew 60.4% to $248.3 million in fiscal 4Q17, including the impact of the extra week. On a comparable basis, its e-commerce sales were up 50.4%. The company’s online sales accounted for 12.8% of its overall sales in fiscal 4Q17.

Ulta Beauty experienced strong performance in its prestige boutique brands such as MAC, Clinique, Lancome, and Benefit. The company intends to ramp up the rollout of the prestige boutiques faster than it initially planned. The company’s sales also gained from strength in prestige skincare, prestige fragrance, and mass cosmetics.

However, the company’s fiscal 4Q17 sales were under pressure due to continued moderation in the growth rate of its makeup category. Ulta Beauty has been experiencing a deceleration in its sales growth. This trend is due to the slowdown in the beauty industry as well as rising competition and discounts being offered by other retailers and department stores. 

JCPenney (JCP) has been expanding the presence of its Sephora in-stores within its locations. JCPenney operates 641 Sephora stores inside its locations and plans to open about 30 locations in fiscal 2018.

Full-year sales and outlook

For fiscal 2017, Ulta Beauty’s (ULTA) sales grew 21.2% to $5.9 billion. Excluding the impact of the 53rd additional week in fiscal 2017, the company’s net sales were up 19.0%. The company’s same-store sales grew 11.0% in fiscal 2017.

For fiscal 2018, Ulta Beauty expects its overall sales to grow in the low teens percentage range. The company’s same-store sales are expected to rise ~6.0%–8.0%, including the impact of e-commerce. The company expects its e-commerce sales to grow in the 40.0% range.

We’ll look at the company’s margins in the next part of this series.

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