Beauty and personal products retailer, Ulta (NASDAQ:ULTA), reports its fourth-quarter results after the closing bell on Thursday. Estimize is looking for EPS of $1.30, four cents higher than the Street’s expectation of $1.26, and even higher than the company’s own guidance of $1.23. Take that last figure with a grain of salt, however; Ulta has low-balled guidance for the last 3 quarters. Estimize revenue estimates of $1.0B are in line with those of Wall Street. No matter which way you slice it, this is a company that has posted double-digit sales growth every quarter since its IPO in late 2007, and this quarter should be no exception, with revenue growth expected to hit 19%. Earnings growth has also been in the double digits for every quarter since Q2 2009.
Beauty is a big business – one that has grown exponentially in the last 5 years – and Ulta has swiftly turned into one of the top specialty beauty retailers in the country. Part of its success results from a unique product mix, offering very high-end items that can be found at department stores, with lower-end products typically found at pharmacies. Also, unlike many of its competitors, Ulta offers salon services, making it a one-stop shop for all of a woman’s beauty needs. However, it is beginning to face some fierce competition as the space heats up. Kohl’s (NYSE:KSS) has started to roll out full beauty departments in its stores, and J.C. Penney (NYSE:JCP) has doubled down on the expansion of Sephora shops within each of its stores.
Ulta recently announced a five-year plan which includes opening 100 stores per year, raising e-commerce to 10% of total sales from the current 4%, and aiming for comparable-store sales growth of 5-7%. So far, the company is off to a good start on all measures, specifically with regard to store expansion. While many retailers have been forced to close stores in the last 5 years, due in part to the popularity of e-commerce, Ulta has more than doubled its numbers in that time, increasing its fleet to 715 locations. The retailer also made a decision in the early days to limit its mall locations, which were experiencing a decrease in foot traffic and were also seen as less convenient for shoppers. Instead, it focuses on opening in shopping centers, which allows the company to also customize store sizes. Currently, the average store is 10,000 square feet and located in larger cities, but Ulta has also increased its 5,000-square foot model, which allows it to target customers in smaller towns.
When the company reports on Thursday, expect to see mention of deep discounts over the holiday shopping season as a way to deal with stiff competition. We’ll also be looking to see how Ulta’s investment in better messaging, targeted promotions, employee training and a new loyalty program has paid off.
According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, Blogger Estimize has a total average return of 7.2% and a 62% success rate. Estimize is Ranked #850 out of 4280 Bloggers