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Why Ulta Beauty’s Fiscal 4Q17 Earnings Lagged Expectations

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Earnings miss estimates

Ulta Beauty (ULTA) delivered adjusted EPS (earnings per share) of $2.75 in fiscal 4Q17, which ended on February 3, 2018. The company’s fiscal 4Q17 EPS lagged the consensus analysts’ estimate of $2.78. However, the company’s adjusted EPS rose 22.8% on a year-over-year basis in fiscal 4Q17.

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Key growth factors

The growth in Ulta Beauty’s (ULTA) adjusted EPS was primarily driven by higher sales. We’ll discuss the company’s sales in Part 3 of this series. The company’s fiscal 4Q17 adjusted EPS excludes a $0.65 net benefit associated with tax reform–related items. 

The company’s fiscal 4Q17 EPS benefited from a lower share count resulting from share repurchases. Share repurchases enhance EPS by reducing the average share count. The lower share count contributed $0.07 to its fiscal 4Q17 EPS.

For fiscal 2017, the company’s adjusted EPS grew 25.2% to $8.16. The company’s reported EPS grew 37.4% to $8.96 in fiscal 2017. The reported EPS included the impact of a net benefit of $0.65 associated with tax-related items and a $0.15 benefit related to the share-based accounting change.

Fiscal 2018 outlook

Ulta Beauty (ULTA) expects its fiscal 2018 EPS (including one-time items) to grow in the 20.0% range compared to $8.96 in fiscal 2017. This estimate includes the impact of about $500.0 million in share repurchases.

In fiscal 2017, Ulta Beauty repurchased 1.5 million shares for $367.6 million. At the end of fiscal 2017, the company had about $79.0 million remaining under its $425.0 million share repurchase program that was announced in March 2017. 

Ulta Beauty’s board has approved a new share repurchase program of $625.0 million, which replaces the previous plan. The company expects to repurchase shares in the $500.0 million range in fiscal 2018.

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