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ULTA Beauty (ULTA)
When
you think of the return of
the American consumer, the last thing on your mind is hairspray,
perfume
and skincare products; but the fact of the matter is that Ulta Beauty
and competitors
like Sally
Beauty Supply might already be reaping the rewards of a
stronger consumer
who is armed with credit and ready to make a fresh start.
Recent
economic data supports
the thesis that consumer strength and spending is indeed
improving.
Ulta is what I would consider a “discretionary-staple”
company in that they offer many of the day to day aesthetic needs of
American
consumers (mostly women, but men as well) which help keep revenue
flowing under normal financial circumstances. In times of
growth, ULTA
will enjoy higher net sales, but also a gravitation towards high price,
high
margin products and services.
Company
Description & Financials
Founded in 1990, Ulta Beauty is the largest beauty retailer
in the U.S. that provides one-stop shopping for salon products and
services
through their 449 stores across 43 states in addition to their robust
e-commerce business. They offer a unique
combination of over 20,000 prestige and mass beauty products across the
categories
of cosmetics, fragrance, haircare, skincare, bath and body products and
salon
styling tools. We also offer a full-service salon in all of our stores.
Recent strength in sales numbers from the majority
of U.S. retailers suggests that ULTA could see another strong quarter
in
profits. ULTA is a mid-cap (5.74 billion) company that is trading at about 37.68
times
forward (expectations for next quarter) earnings with a low PEG ratio
of 1.47. ULTA has been a Zacks Rank 1 strong buy since
December 2, 2011
Total
sales increased 23% compared to the same period one year
prior.
Earnings increased from $1.16 in FY2011 to $1.90
in FY2012. They are expected to earn $2.44
in FY2013, according to the Zacks Consensus Estimate.
Earnings
Estimates
Of the 10 analysts who cover Ulta
Beauty, the consensus is for the company to grow earnings by 28.32% in
the
current year (FY2013) and roughly 26.4% in FY2014. The
discount beauty
company has exceeded analysts’ expectations to the upside 4 quarters in
a row; with
an average upside surprise of 14% over the past year.
In terms of the magnitude of
analyst estimate trends, we are seeing consensus estimates the same or
higher than
they were 90 days ago for the current quarter as well as FY2013 and
FY2014. Positive
adjustments to earnings estimates have been minor and next quarter’s
estimates
are 1 cent lower than they were 90 days prior.
ULTA is expected to earn 48 cents when they report on June 5th.
Ulta’s
same store sales have been steadily growing
over the past year with Q4 2011: +11.5%, Q3 2011: +9.6% and Q2 2011:
+11.3%
Market
Performance & Technicals
Ulta spent the last quarter of 2011 and part of January 2012 in a
channel between
$64 and $74. On January 5th,
2012 Ulta
boosted their Q4 outlook, sales, revenue and EPS all higher, which
propelled
the stock higher through the 50 day moving average. Since
that date, Ulta has remained above its
50 and 200 day moving averages which now stand at $86.95 and $71.50
respectively.
Volume
is fairly strong, averaging roughly 700k daily. Ulta
Beauty almost doubled the S&P 500’s performance over the past
year;
exceeding it by 76%. It outpaced it by 18%
in the past 3 months alone and by almost 5% in the last 30
days.
Jared
A Levy is the Senior Stock Strategist for Zacks.com. He is also the
Editor in
charge of the market-beating Zacks
Whisper Trader Service.
ULTA SALON COSM (ULTA): Free Stock Analysis Report
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