Sales growth in Q3
Ulta Beauty’s (ULTA) third-quarter sales grew 16.2% to $1.56 billion. The third-quarter sales growth was in line with analysts’ estimates but was slower than the 18.6% growth in the fiscal 2017 third quarter. The company’s same-store sales grew 7.8% in the 2018 third quarter compared to the 10.3% growth in the 2017 third quarter.
Strong e-commerce growth
Ulta Beauty’s sales growth in the third quarter was driven by strong same-store sales growth and the contribution from new stores. Ulta Beauty opened 95 new stores, remodeled 13 stores, and relocated two stores in the first nine months of fiscal 2018. The company’s adoption of a revenue recognition standard related to revenue from contracts with customers added $10.5 million to the third-quarter net sales.
Ulta Beauty’s e-commerce sales grew 42.5% to $170.7 million, accounting for 11% of the company’s overall third-quarter sales. Strong transaction growth helped the e-commerce channel contribute 340 basis points to the company’s same-store sales growth. Ulta Beauty’s e-commerce channel experienced traffic growth of about 36% with mobile traffic rising 44%. In terms of product categories, mass cosmetics, prestige skincare, fragrance, prestige boutique brands, and sun care delivered impressive growth.
Ulta Beauty expects its net sales in the range of $2.085 billion to $2.103 billion in the fourth quarter, which ends on February 2, 2019. This guidance fell short of analysts’ estimate of $2.12 billion. The company’s net sales of about $1.94 billion in the fourth quarter of fiscal 2017 were favorably impacted by an additional week.
The company expects its fiscal 2018 fourth quarter same-store sales growth in the range of 7% to 8%, which is lower when compared to the 8.8% growth in the fiscal 2017 fourth quarter.
Following its third-quarter results, Ulta Beauty reiterated its full-year fiscal 2018 sales growth guidance in the low-teens percentage range. Fiscal 2018 same-store sales growth is expected to be about 7% to 8%.
We’ll discuss the company’s margins in the next part.