Ulta Beauty Raises Guidance; After Q2 Earnings, Sales Shine

Ulta Beauty (ULTA) hit the Wall Street runway in style late Thursday after the cosmetics and salon products retailer posted second-quarter sales and earnings that sailed past views and raised full-year guidance.

Earnings surged 22.3% to a $1.15 share, besting forecasts for $1.12 a share. Sales jumped 19.4% to $877 million, topping estimates for $869.76 million.

Though Q2 growth was slower than Q1's, it was Ulta's (ULTA) 20th straight quarter of double-digit sales and earnings growth.

Same-store sales — sales for stores open at least 14 months and e-commerce sales — jumped 10.1% from a year earlier, driven by 7% growth in transactions and 3.1% growth in average ticket.

Ulta shares jumped 5% in late trading after closing up 1.4%.

The company now expects to deliver full-year earnings per share growth in the high teens, compared to its previous guidance of the high end of the range of 15% to 17%. Analysts expect 21% growth for the year.

Ulta also sees full-year same-store sales rising approximately 8% to 10%, including the impact of the e-commerce business, compared to previous guidance of 7% to 9%.

Ulta sees Q3 EPS of $1 to $1.05, about in line with consensus, on sales of $869 million to $883 million, largely above views for $870.3 million. Comp sales are seen climbing 8% to 10%.

"I was very impressed with the results," Edward Jones analyst Brian Yarbrough told IBD. "The numbers looked very solid across the board.

Ulta is a one-stop shop for beauty and salon products at a variety of prices.

"I think the management team is doing a really good job around building awareness around the Ulta Beauty brand as well as putting new and innovative products into the stores," said Yarbrough. "That's driving a lot of consumer interest.

Ulta has some of the "best results in all of retail," he added, citing the 10.1% increase in same-store sales in Q2 on top of a 9.6% gain a year earlier.

The company offers more than 20,000 products, from high-priced so-called prestige brands sold in department stores and specialty stores to lower-priced labels sold via the mass channel, including drugstores and discounters. It has a full service hair salon in stores.

"They offer an incredibly compelling assortment of beauty and cosmetic products across the spectrum and they offer that product through a very welcoming store experience," Simeon Siegel, senior retail analyst at Nomura Securities, told IBD prior to the Q2 report.