Dive Brief:
- After cutting its full-year outlook twice this year, Ulta Beauty on Thursday raised its guidance slightly on the back of 1.7% sales growth. Net sales hit $2.53 billion in the third quarter as comps edged up 0.6%, per a company press release.
- Net sales for the year are now expected to land between $11.1 billion and $11.2 billion, up from $11 billion to $11.2 billion. Comps are projected to fall 1% or stay flat, as opposed to previous guidance that saw up to a 2% decline.
- At the same time, Ulta announced that Chief Merchandising Officer Monica Arnaudo will be stepping down from her position in spring 2025. The retailer is looking for a successor and said Arnaudo, who has been with Ulta since 2017, will help with a transition.
Dive Insight:
Despite increased pressure from Sephora’s Kohl’s shop-in-shops and other new points of distribution, Ulta is seeing some early benefits from its work to secure its market position.
CEO Dave Kimbell on a call with analysts last week said the retailer continued to improve its assortment in the quarter by bringing in new brands like Ilia Beauty, Oak Essentials and The Honey Pot. New launches like Tatcha, Apothekary and XO Khloé are set for the rest of the year.
“Trends look to be improving in prestige, with market share ~flat following previous share loss,” Piper Sandler analysts led by Korinne Wolfmeyer said in emailed comments. “Engagement efforts seem to be steadily working following adjustments from all angles, including newness, marketing, and promos.”
Kimbell noted that the effectiveness of Ulta’s discounts has improved since the start of the year, but that customers are still highly focused on value given concerns about the economy. That should impact the holiday season as well, but Chief Financial Officer Paula Oyibo said the season is “off to a solid start” so far.
“We are encouraged by what we're seeing, but we also recognize that we have several important weeks ahead of us in the holiday season and the operating environment is dynamic,” Oyibo said on the call.
Piper Sandler noted that the “encouraging commentary for the start of holiday largely aligns with our checks,” but said there are still a few critical weeks to come that make it “cautiously optimistic” for Ulta’s fourth-quarter results.
The retailer has had an uncharacteristically difficult year, with sales growth slowing in Q1 and coming to a halt altogether in Q2. Executives have repeated at length that there is more competition in the space now than ever and that about 1,000 new points of distribution have opened in the past couple of years, many of them close to Ulta’s own stores.
Still, the retailer is not giving up on growth. The company plans to expand to Mexico next year and unveiled a strategy in October that includes opening about 200 stores over the next three years. This year and next, however, will be “transitional years” as the company navigates its current challenges, Oyibo said at the time.
