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Home / Business / Ulta Beauty Predicts Faster Sales Growth – The Motley Fool

Ulta Beauty Predicts Faster Sales Growth – The Motley Fool



The sales environment has worsened in key areas of the make-up industry, and this shift has had an impact on Ulta Beauty (NASDAQ: ULTA) business. Sales have risen in recent quarters, but not as strong as last mid-2017. Profitability is on a multi-year downtrend.

These adverse forces continued to weigh on Ulta Beauty's second-quarter business, but the retailer said it was on course to reach management's revenue and earnings targets for 2018.

More about this steady forecast a moment. Let's look first at how the overall results compare to the same period last year:

Metric

Q2 201

8

Q2 2017

Change (JOY)

Sales

$ 1.49 billion [19659009] 1.29 billion

15%

Net income

148 million

114 million

30%

EPS

2.46

1.83

34%

Data source: Ulta Beauty's financial filings. JOY = year over year.

What happened during the quarter?

Revenue growth met management's goals, but continued its downward trend that has been ongoing for over a year. Profit margins have declined in the meantime, thanks to a mix of competitive moves and increased spending to support the online sales channel.

  A woman is wearing a lotion on her face.

Source: Getty Images

Here are the key highlights of the quarter

  • Sales of comparable stores or disposals at existing locations grew 6.5%, within the target range returned by management at the end of May. This was the fifth quarter in a row that the retailer's growth slowed (earnings growth was 17% at the beginning of 2017).
  • Ultas revenue growth was driven by a balanced mix of increased customer traffic and increased spend per visit.
  • E-commerce segment grew 38% and contributed 2.5 percentage points of total comps profits.
  • Ulta added 19 stores to its footprint sales, total sales increased 15%.
  • Gross profit declined slightly, and selling expenses increased at a faster rate than sales. As a result, the operating margin dropped from 14% of sales a year ago to 13% of sales.
  • Falling tax debts drove profits up 30%.

What management had to say

Executives The retailer's valuable brand and flexible approach allowed him to grow in a confusing retail environment. "The Ulta Beauty team has done well in the second quarter," said CEO Mary Dillon in a press release, "reflecting the rapid growth of prestige boutique brands, mass cosmetics, skincare and fragrances through the continued moderation in growth rates of a few of our major color cosmetics brands . "

" Our flexible business model, "continued Dillon," continues to support healthy retail conditions, excellent new business productivity, and high growth for Ulta.com, resulting in significant market share gains in various categories. "

Looking Forward

Executives issued a short-term outlook that the comps should rise between 7% and 8% in the third quarter, marking Ulta's first growth acceleration in over a year. Year-on-year growth of 11% is expected to boost total revenue by approximately 7% this year.

Ulta's other key financial goals remained unchanged, including expectations for a second annual reduction in operating profit margin. The company is working to remain competitive in its core categories while supporting its e-commerce segment. The management plans to open around 100 new locations in 2018. This aggressive pace of expansion seems to be aided by healthy customer traffic and low-spending spending during the holiday season.


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