Ulta sees revenue boom, Salesforce raises full-year guidance, Williams-Sonoma rallies on record Q2

Myles Udland, Brian Sozzi, and Julie Hyman break down Thursday’s early morning earnings, which include: Salesforce raising its guidance after beating estimates and acquiring Slack, Ulta shares surging after reopening efforts helped boost the company’s revenue by 60%, Williams-Sonoma upping its revenue outlook after posting record Q2 results, Abercrombie and fitch delivering a mixed Q2 as online sells saw a decline, and Coty riding the wave of a rebound in makeup sales to report a quarterly earnings beat.

Video transcript

JULIE HYMAN: Let's talk some earnings now. And we start with Salesforce, whose shares are up 3% in premarket trading. The company, coming out, as you can see, with earnings and sales that beat analysts' estimates. Earnings in particular, beating by a pretty broad margin here.

And Salesforce, of course, is one of the proxies that we look at in terms of business spending and IT spending in particular. And it looks like that spending is continuing to boost the company's numbers.

Another note, of course, is that the company last month completed its purchase of Slack. So we'll be looking to get some more information on how that is going to continue to contribute to the company's numbers. It looks like the analysts' commentary around this is pretty positive as well this morning. Brian Sozzi, what's your read on these numbers?

BRIAN SOZZI: Well, one little nugget on the earnings conference call, Marc Benioff, CEO of Salesforce, he was actually doing the call live from Geneva, Switzerland. He was there attending a World Economic Forum event there. So good to see Marc Benioff back on the road, traveling, doing what he does, go to high profile events and talk about the company, and maybe close some business.

But very interesting nuggets from this earnings call. I think [INAUDIBLE] see the stock up here in the premarket share, he had some good things to say about operating margins and guidance in that regard. But really, some of the acquisitions that Salesforce has made, they're starting to pay off. And they're really starting to help them sell more stuff to large customers.

They noted on the call last night, Tableau acquisition that they made, that product was sold in 9 of its top 10 deals in the quarter. MuleSoft, another acquisition for the company, they sold products in 8 of its top 10 deals. So that is good.

And now all eyes turn to Slack. In Slack's business, one, that deal just closed a couple of weeks ago. That process, integrating the company, is well underway. Business for Slack seems to have accelerated for large customers in the most recent quarter.

And I really think you're getting a sense that Salesforce is going to be going really head to head, even more than it has been, with Microsoft. You have a Salesforce now with a Tableau, with a MuleSoft, with Slack that really, really could be taking some market share from Microsoft over the next couple of quarters and years. It's going to be a fascinating battle to watch over that time frame.

JULIE HYMAN: Yeah, I mean the questions about Slack's-- the competitive landscape for Slack are not going to go away in terms of Teams probably being its biggest competitor. So we'll see if indeed it does get more strength from being a part of that bigger entity.

Let's talk Ulta, shall we? Ulta Beauty, the company raising its sales forecast, second quarter numbers beating estimates. As you can see here again, another earnings per share beat by a wide margin. The company now predicting sales for this year of as much as $8.3 billion. The prior forecast, the top end was $7.8 billion. And it seems store sales, it says this year will rise as much as 32%.

So obviously big gains there. Oliver Chen over at Cowen saying in a note in reaction, "beauty is back." And Soz, as you noted to us this morning, Ulta also already has, of course, in-store salons, other beauty services in addition to selling stuff. And it's going to emphasize sort of beefing up those services.

BRIAN SOZZI: Yeah, it seems to be a natural extension-- I'll get to it in a second-- a natural extension of what they're seeing in terms of trends in their business. So makeup sales for Ulta totally-- very much continue to recover from the first quarter as masks come off and people go back outside and need their makeup.

But mass makeup sales still below 2019 levels, worth noting there. But what they are-- they're continuing to see a lot of strength in facial hair. And to that point, they're now starting to test micro channeling-- not too sure what that is, full and fair disclosure, never heard of that before-- dermaplaning, I have heard of, and hydrofacials.

So in effect, I think they're trying to change their stores, or at least the service section, to be the dermatologists of the next decade. And why not? They have the space. Why not try to get these services? They're very high margin and everybody wants to protect their face. I know I do. I get my eyebrows done. Maybe I'll try it at Ulta.

MYLES UDLAND: They look great, Soz. They look great.

BRIAN SOZZI: I appreciate that. I take a lot of pride in it.

MYLES UDLAND: And something else, they also called out that their brow business, their in-person hair and brow services, up more than 60% compared to last year. Certainly going to be higher margin part of the business. And then you have people in the store, obviously more likely then to go and buy something to go along with that service.

And I know it's a new part of the business. And I don't know that I would have thought 60% lapping a pandemic year. You would have seen a comp little bit better than that. But certainly shows to the way that as you remake the stores and you create more of those shares to have those services in there, it's certainly going to be a growth driver.

And there's one thing that we all know analysts love more than anything else inside of any business-- are you doing a new thing-- you know, you buy a new company, offering a new product, offering a new service-- and does that thing have higher margins than the structural business? And in the case of Ulta, the answer on offering these services is going to be yes.

BRIAN SOZZI: You know, Myles, I know you and I are supposed to play golf at some point. But maybe we could just go to Ulta and get facials together. I'm down if you're down.

MYLES UDLAND: That's great. I mean, sure.

JULIE HYMAN: If that's happening, please, please send a camera crew.

BRIAN SOZZI: Oh, you will get photos of this.

JULIE HYMAN: [INAUDIBLE] to do that.

BRIAN SOZZI: You will get photos.

MYLES UDLAND: I mean, Julie's not a a golfer. Julie's not a golfer. But if we're going to go get exfoliated--

JULIE HYMAN: That's true. I could--

MYLES UDLAND: Come on.

JULIE HYMAN: You know, I have never-- I've never had a facial, ever.

BRIAN SOZZI: Team outing. This is great.

JULIE HYMAN: I have gotten my brows done. But that's a self-service now. I do that myself.

All right, let's I just want to mention Coty since we're talking about Ulta, by the way. Because the beauty-- you would think that the beauty, the return of beauty would help a makeup cosmetics maker like Coty. And indeed it did last quarter. Those shares are up 6%. That company, coming in with revenue of $1.06 billion and topping estimates. And Coty has a suite of global brands that seem to be performing well.

And up next, let's go to the Myles Udland trade, as he himself called it this morning, Williams-Sonoma out with its numbers, it too beating estimates. And we call it the Myles Udland trade because anyone who has watched the show for any period of time knows that Myles and I have moved to the suburbs during the pandemic. And we've been in the market for some new stuff for our homes.

Williams-Sonoma doesn't just own its namesake brand. It owns West Elm as well, which sells furniture and Pottery Barn of course, as well. Comps of Pottery Barn, Myles, about to almost 30% there. West Elm, 51%. So we know where people are going to get their furniture.

MYLES UDLAND: Yeah, and when you look at the size of the West Elm business and the Pottery Barn business, just the overall revenues, compare that to the namesake, Williams-Sonoma, you're now looking at businesses that are two and three times as big, respectively, for West Elm and Pottery Barn. $732 million in revenues from Pottery Barn, $580 million from West Elm, as you mentioned. 51% comp sales growth at West Elm, almost 30% at Pottery Barn.

And look, you know, there are many ways to play the suburban flight trade. You can play it through housing. You can play it through autos. You can play it geographically. But certainly, how you put stuff in your house, how a certain type of millennial fills out their home, I mean, you look at the stock chart of Williams-Sonoma and it's not hard to see that this trade really sits at the center of it.

And look, the West Elm stuff, I think it's fine, right? I think it's definitely overpriced. I don't think the quality is really what it should be for what you're paying. But at the same time, you go to West Elm and it all looks-- right, it looks good enough. And I think that's why we got a bunch of that crap in this house.

BRIAN SOZZI: Well, yeah, I think we suffer from Williams-Sonoma, is really a lot of that stuff--

JULIE HYMAN: Don't let your wife hear you say that.

BRIAN SOZZI: Yeah, seriously, Myles. We're on live here, man.

MYLES UDLAND: Look, I'm just-- the chair right behind me, I don't know if you can see it. Oh, my [INAUDIBLE] is sticking out. There's a chair right behind me that's West Elm. That's a nice chair. It's a good-- like it's sort of like an Eames chair angle. So it's a good chair to relax in. But, you know, like we put some shelves in. They were-- I would have got the IKEA ones. Now, they look nicer. They look nicer. But I just-- they didn't feel like all that much different from-- but whatever, it's a shelf. We'll let it go.

BRIAN SOZZI: Let it go, man. Just let it go. And, you know, I'll just quickly add too, I think what we saw from Best Buy earlier in the week is the same thing we're seeing at Williams-Sonoma, is that the pandemic is, for some companies, has just changed their potential earnings power for the next decade.

I mean, there are structural changes that a company like Best Buy's benefiting from. All this new tech gear, you use it so much over the next year or you use it a lot over the past year, you're probably going back, trying to upgrade it and finding new cool things to help improve your work situation. Same thing for Williams-Sonoma.

Sure, maybe not buying a new couch this year if you bought one last year. But maybe you're buying some new lamps to further fill out the look because you couldn't afford those lamps that last year. So that's benefiting the company.

And also too, lastly-- and I have a bigger story on Yahoo! Finance's home page right now-- another company, another retailer giving a lot of money away to shareholders, new $1.25 billion stock buyback increases the dividend 20%. Yesterday we saw Dick's special dividend $5.50, repurchasing more of its share. So some of these retailers that are fundamentally strong, a lot of cash on their balance sheet, they're giving it away.

JULIE HYMAN: Yeah, and that also-- buybacks, that is broadly happened to be the subject of the "Morning Brief," which we are going to talk about in the next hour. Finally, let's round it out with Abercrombie and Fitch. That company, I believe, was bouncing around a little bit in premarket trading.

Revenue coming in at about $865 million, that's below the $879 million that analysts were predicting. And digital sales fell by 3%, really interesting here. The CEO saying in the commentary that sales held pretty steady. That was the way she was sort of spinning that. And they represented 44% of total second quarter sales. Soz, what do we think here about Abercrombie?

BRIAN SOZZI: I have no knocks on this quarter from Abercrombie and Fitch. I can understand why the market is sending it down here. The stock did trade higher into this quarter. And the stock has also been trading near, I believe, a five-year record high according to Yahoo! Finance Plus data. And I know you know one of our producers who I won't name here-- I won't put them on blast. Maybe not feeling some of the new styles out of Abercrombie and Fitch. We'll leave that-- we'll save that for a different day.

But overall, this is a company that grew its gross profit margins by 590 basis points year over year, operating margins up more than that because they've closed hundreds of stores, [INAUDIBLE] flagship locations. And oh yeah, they join the parade of retailers that have come out saying that August so far to date is off to a strong start because of a strong back to school.

MYLES UDLAND: You know, I like that rule, Sozzi.

JULIE HYMAN: Contribution notwithstanding-- sorry, go ahead, Myles.

MYLES UDLAND: Oh, no, I like that-- I like that rule, we'll leave people's names out when they don't particularly find themselves enthused by a brand and don't spend money there, right?

So if I'm lodging my sort of lukewarm warmness towards the West End catalog, I'm also admitting I spent a ton of money with them. So I'm allowed to air my grievance.

But if you went and didn't shop at retailer X, you can't then come on air and identify yourself as having done so because you didn't like the selection.

BRIAN SOZZI: Yeah, you know, I think this unnamed person, while they-- I mean, they love [? Oatly, ?] they spend a lot of money on there. I think they actually want to spend on Abercrombie and Fitch and Hollister. They just didn't find anything they liked.

But I don't know if that's a view that is generally shared, just looking at this quarter. Sales up, all in all, pretty good.

JULIE HYMAN: Names have been withheld to protect the innocent. I don't know what this is. All right.