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This Is Expected to Drive Ulta Beauty’s Q1 Earnings

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Earnings expectations

Ulta Beauty’s (ULTA) earnings surpassed analysts’ expectations in all four quarters of fiscal 2018, which ended on February 2. Its adjusted EPS grew by an impressive 31.3% to $3.61 in fiscal 2018’s fourth quarter and surpassed analysts’ expectation of $3.56. The strong earnings growth was a result of higher sales, lower tax, and a lower share count due to share repurchases.

Analysts expect Ulta Beauty’s adjusted EPS to grow 16.7% to $3.07 in the first quarter of fiscal 2019, which ended on May 4. They expect this EPS growth to be driven by a 13.1% estimated growth in sales.

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Company’s guidance

Ulta Beauty expects fiscal 2019 EPS of $12.65–$12.85, compared with $10.94 in fiscal 2018. The company expects its gross margin to improve in fiscal 2019, driven by its wider merchandise margin, rent and occupancy cost leverage, and credit card program. Ulta Beauty expects its operating margin to expand by 10–20 basis points in fiscal 2019.

The company’s guidance accounts for a lower share count due to planned share repurchases of $700 million. Ulta Beauty expects EPS percentage growth in the low teens and modest operating margin contraction in the first half of fiscal 2019. It expects the situation to improve in the second half, with high-teen percentage EPS growth and slight operating margin improvement. The company’s profitability is expected to be pressured in the first half of fiscal 2019 due to investments in strategic initiatives.

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