Ulta Beauty has posted “beautiful” Q2 results, bolstered by the acquisition of British beauty retailer Space NK.
Second-quarter net sales increased 9.3 per cent to $2.8 billion, driven by strong comparable sales, the UK brand’s acquisition, and new store contributions.
GlobalData MD Neil Saunders said the company’s comparable sales, including e-commerce sales, are “very strong,” with a 6.7 per cent increase, attributed to consumers’ sentiment towards the brand.
The beauty company’s gross profit grew by 11.6 per cent to $1.1 billion, while its net income increased 3.3 per cent to $260.9 million compared to $252.6 million.
“The Ulta Beauty team delivered strong results in the second quarter, with outstanding top-line performance, fueled by growth across all major categories, driving market share growth and better-than-expected profitability,” said Kecia Steelman, Ulta Beauty’s president and CEO.
Operating income rose to $344.9 million from $329.2 million in the prior-year period. However, as a percentage of net sales, the operating margin narrowed to 12.4 per cent from 12.9 per cent.
“As we look to the future, we remain committed to executing our Ulta Beauty unleashed strategy and strengthening our operating model, despite the near-term uncertainty that persists,” said Steelman.
The Ulta CEO said the company’s outlook reflects its performance and caution regarding how consumer demand may evolve for the remainder of the year.
“We’re staying focused on what we can control and on executing with excellence to deliver our uniquely Ulta Beauty experience.”
The company expects net sales to rise from $12 billion to $12.1 billion, while comp sales increase from 2.5 per cent to 3.5 per cent.
During the quarter, Ulta opened 24 new stores, relocated two stores, remodelled five stores, and closed two stores, as part of the company’s expansion plan, which includes the Middle East, UK, and Mexico, due to the US hometown market reaching its plateau.
This month, the beauty brand ended its partnership with Target, which left a “circa $460 million gap to fill” for the discount department store..
“Ulta is a retailer on the front foot with exciting international plans, while Target is a retailer that’s still struggling to get the basics back on track,” said Saunders.
“The worry has always been that Ulta is hitting more of a ceiling in the US. This is true to some extent, although when the overall market is in growth territory, it is less of an issue.”
