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Key Factors that Boosted Ulta Beauty’s Fiscal Q2 Sales

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Better-than-expected sales

Ulta Beauty (ULTA) generated sales of $1.49 billion in the second quarter of fiscal 2018, which ended on August 4. The company’s fiscal second-quarter sales lagged the consensus analyst estimate by a mere 0.1%. Ulta Beauty’s sales grew 15.4% on a year-over-year basis in the second quarter of fiscal 2018 compared to the 20.6% growth in the second quarter of fiscal 2017. Ulta Beauty’s sales grew 17.4% in the first quarter of fiscal 2018.

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Q2 sales in detail

Ulta Beauty’s net sales consist of its retail store sales, e-commerce sales, revenue from salon services, and other revenue. Retail store sales grew 13.0% to $1.3 billion in the fiscal second quarter. The company’s e-commerce sales increased 37.9% to $132.8 million and accounted for 9% of the company’s overall sales compared to 8% in the second quarter of fiscal 2017. Salon services revenues increased 8.8% to $74.0 million.

Ulta Beauty’s same-store sales grew 6.5% in the second quarter of fiscal 2018. This growth rate was slower compared to the 11.7% rise in same-store sales in the second quarter of fiscal 2017. The slowdown reflects continued pressure in some of the large color cosmetics brands. Ulta Beauty experienced strong same-store sales in categories like prestige boutique brands, mass cosmetics, skin care, and fragrance in the fiscal second quarter. e-Commerce sales accounted for 250 basis points of the company’s same-store sales growth.

Sales outlook

Ulta Beauty expects same-store sales growth of 7% to 8% in the third quarter of fiscal 2018 and same-store sales growth in the range of 6% to 8% in full-year fiscal 2018. The company continues to expect its overall sales growth in the low teens percentage range in fiscal 2018.

Aside from higher same-store sales, the company expects its overall sales growth to be driven by additional sales from new stores. Ulta Beauty opened 19 stores in the fiscal second quarter, ending the quarter with 1,124 retail stores. Ulta Beauty aims to open 40 new stores in the fiscal third quarter and is on track to open 100 net new stores in fiscal 2018.

Let’s discuss Ulta Beauty’s margins in the next part of this series.

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