Ulta Beauty has reported strong top-line growth for the third quarter, which an analyst attributed to the company’s expanded assortment that helped boost consumer demand.
For the quarter ended November 1, net sales soared 12.9 per cent year-on-year to $2.9 billion, with comparable sales up 6.3 per cent.
According to GlobalData MD Neil Saunders, Ulta’s uplift, especially in comparable sales, was very robust against the backdrop of intense competition within the beauty market.
“It is a testament to the increased effort the business has put into injecting new brands and products into the assortment – including more exclusive lines,” he said. “This has not only created interest and stimulated more impulse buying, but it has also fed the increasing desire for discovery among consumers.”
Ulta is aiming for the best of both worlds: Stores that create an experience and an online proposition that aids discovery and offers convenience, Saunders said, adding that this is a sensible direction to take.
Marketing has also been elevated, and operations have been strengthened during the quarter, the analyst said.
On the bottom line, however, operating income fell from $318 million a year earlier to $309 million, and net income decreased 4.6 per cent to $230.9 million.
According to Saunders, Ulta has not yet reached the saturation point in the US, but the headroom for future growth has most certainly narrowed. The company has looked to address this by tapping international horizons as a future growth opportunity, such as the Space NK acquisition.
“The addition of the business into the fold flatters the overall sales numbers, but it also holds potential for Ulta in the years ahead and gives it a more premium retail brand that it can grow and internationalize should it choose,” Saunders said.
“At the same time, ventures in Mexico and the Middle East could be the start of a more rounded push into those markets,” he added.
The company has raised its outlook for the full year, expecting comparable sales to grow 4.4-4.7 per cent compared to the prior 2.5-3.5 per cent range.
Saunders said the holiday quarter should be another robust one for Ulta, both because beauty remains a key gifting category and Ulta is pulling out all the stops to engage with consumers.
