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HomeFinanceAfter 2 years of demand, Ulta Beauty execs say prices are now...

After 2 years of demand, Ulta Beauty execs say prices are now starting to fall


For the past two years, sales at beauty-products and salon chain Ulta Beauty Inc. have ballooned, as the economy’s reopening from the pandemic — and the return to vacations, offices, restaurants and concerts — made presentability a bigger priority. And as prices fell for other leisure purchases, from TVs to pants to laptops, prices for cosmetics, skincare and haircare stayed high.

But now, Ulta Beauty
ULTA,
+0.77%

executives said Thursday, rivals have started to cut prices for beauty products.

“Inflation concerns remain high, and consumers are spending more selectively while also showing a continued willingness to splurge and treat themselves,” Chief Executive Dave Kimbell said on Ulta’s first-quarter results earnings call on Thursday.

“Engagement with beauty remains strong, reflecting the prioritization of self-care,” he continued. “Category growth is healthy but moderating as we lap two years of unprecedented growth. And as category growth normalizes, promotional activity is increasing.”

He said that, like in previous quarters, sales for the chain’s mass-market products were growing more than its prestige brands. But he said it was difficult to tell whether that was due to more consumer caution or stronger demand for products from the likes of e.l.f. Beauty Inc.
ELF,
+20.47%

or La Roche-Posay.

“While we do not intend to lead promotional intensity, we will respond as appropriate to protect and expand our share using a variety of tools we have developed and invested in over the last several years,” he said.

Shares of Ulta Beauty tumbled 7.8% after hours on Thursday after the company reported first-quarter same-store sales that just missed expectations and stuck with its full-year same-store sales outlook, amid what management called an “evolving” consumer backdrop.

The company reported net income of $347.1 million, or $6.88 a share, compared with $331.4 million, or $6.30 a share, in the same quarter last year. Revenue increased to $2.63 billion, compared with $2.3 billion in the prior-year quarter. Same-store sales rose 9.3%.

Analysts polled by FactSet expected Ulta to report first-quarter earnings per share of $6.82 on revenue of $2.62 billion and same-store sales growth of 9.4%. 

Ulta raised its full-year sales forecast to $11 billion to $11.1 billion, compared with FactSet forecasts for $11.09 billion. The company kept its same-store sales growth outlook at 4% to 5%. FactSet expected a 5.3% gain.

The results came after demand for beauty products largely held up this year — helped by broader wellness trends and a return to offices, formal occasions and other aspects of pre-pandemic life — despite weaker trends for products like clothing and electronics, as higher grocery prices take more out of consumer savings.  

Shares of Ulta Beauty are still up 37.4% over the past 12 months. By comparison, the S&P 500 Index
SPX,
+0.88%

has risen 3.4% over that period.



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