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ULTA Stock Fell in After-Market Hours on August 30

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Second fiscal quarter performance

Ulta Beauty (ULTA) stock declined 4.7% in after-market hours on August 30 following the announcement of its second fiscal quarter results[1. The second fiscal quarter ended on August 4]. Ulta Beauty’s sales of $1.49 billion lagged analysts’ estimate by 0.1% but increased 15.4% on a YoY (year-over-year) basis.

The company’s adjusted EPS of $2.46 beat analysts’ expectation of $2.41. Ulta Beauty’s adjusted EPS grew 34.4% on a YoY basis. The bottom line growth was a result of higher sales, lower taxes, corporate overhead savings, and the timing of certain expenses.

Despite the earnings beat, investors appeared to be disappointed with the lower-than-expected earnings guidance for the third fiscal quarter.

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Sales growth trend

Ulta Beauty’s sales growth rate of 15.4% in the second fiscal quarter reflected a slowdown—compared to 20.6% growth in the second fiscal quarter of 2017 and 17.4% growth in the first fiscal quarter. Ulta Beauty’s top line is impacted negatively by continued softness in certain large brands of prestige cosmetics. The categories that performed well in the second quarter were mass cosmetics, prestige skincare, fragrance, prestige boutique brands, and sun care.

In the second fiscal quarter, Ulta Beauty’s same-store sales grew 6.5%—compared to 11.7% growth in the second fiscal quarter of 2017. Ulta Beauty’s e-commerce sales rose 37.9% to $132.8 million and accounted for 9% of the company’s second fiscal quarter sales.

Guidance

For the third fiscal quarter, Ulta Beauty expects same-store sales growth of 7%–8%. The company’s same-store sales growth was 10.3% in the third fiscal quarter of 2017. The company expects its third fiscal quarter EPS to be $2.11–$2.16—compared to $1.70 in the third quarter of fiscal 2017. The company’s EPS guidance fell way short of analysts’ expectation of $2.31.

Ulta Beauty kept its previously issued fiscal 2018 guidance intact with overall sales expected to grow by a percentage range in the low teens and same-store sales growth of 6%–8%. The company expects its fiscal 2018 EPS to grow by a percentage range in the low twenties.

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