Why Ulta Shares Were Looking Appealing

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Ulta Salon, Cosmetics, & Fragrance were looking stunning today, jumping as much as 17% after a strong earnings report.

So what: The all-in-one beauty retailer said sales jumped 22.9% to $582.7 million, while earnings per share increased 20.4% to $0.65. Both numbers topped expectations as analysts had projected sales at $576.3 million, and EPS of $0.62. Same-stores sales ticked up 6.7% for the beauty chain, which includes strong e-commerce growth, but comps were down from 10.1% a year ago. Interim CEO Dennis Eck said, "We are pleased with better-than-expected sales and margin performance," and said the company was on track to add 125 new stores this year, increasing the store count by more than 25%.


Now what: Notably, guidance for the current quarter was actually below estimates, with management projecting EPS of $0.64-$0.67, against estimates of $0.68, and revenue of $579 million to $589 million, versus the analyst consensus at $590.3 million. Same-store growth is also expected to drop to 4%-6% in the current quarter. This is a pricy stock with a P/E of 36, and while its aggressive store expansion will ensure additional revenue, the margin compression and slowdown in comparable sales is concerning. I wouldn't expect many more days like this for Ulta shares.

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The article Why Ulta Shares Were Looking Appealing originally appeared on Fool.com.

Fool contributor Jeremy Bowman has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Ulta Salon, Cosmetics, & Fragrance. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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