Ulta Salon Shares Down 6% On Weak Outlook

(RTTNews) - Ulta Salon, Cosmetics & Fragrance Inc. (ULTA), Thursday reported an increase in second-quarter profit, helped largely by a double-digit sales growth. However, shares of the beauty products retailer slipped 6 percent in extended hours on weak earnings outlook for the current quarter.

Bolingbrook, Illinois-based Ulta Salon's second-quarter profit rose to $148.3 million or $2.46 per share from $114.2 million or $1.83 per share last year. On average, 25 analysts polled by Thomson Reuters estimated earnings of $2.41 per share for the quarter.

Ulta Salon's second-quarter sales rose 15.4 percent to $1.49 billion from $1.29 billion a year ago. Analysts had a consensus revenue estimate of $1.49 billion for the quarter.

Gross margin, the percentage of sales left after deducting sales costs, declined to 36.0 percent from 36.4 percent last year, hurt largely by category and channel mix shifts and investments in salon services and supply chain operations.

Comparable sales, or sales from stores open for at least 14 months, increased 6.5 percent during the quarter, compared to an increase of 11.7 percent last year. During the quarter, the company opened 19 stores and ended the quarter with 1,124 stores.

"The Ulta Beauty team delivered a strong performance in the second quarter, reflecting rapid growth in prestige boutique brands, mass cosmetics, skin care and fragrance, offset by continued moderation in the growth rates of a few of our large color cosmetics brands," said Mary Dillon, chief executive officer.

Looking forward to the third quarter, Ulta Beauty expects earnings of $2.11 to $2.16 per share on revenues of $1.55 billion to $1.56 billion. Comparable sales are expected to increase 7 to 8 percent. Analysts currently expect earnings of $2.31 per share on revenues of $1.54 billion for the quarter.

For the full year 2018, the company expects earnings in the "low twenties percentage range" and total sales growth in the "low-teens percentage range." Analysts currently expect earnings of $8.31 per share on revenue growth of 13.80 percent.

ULTA closed Thursday's trading at $244.41, up $2.68 or 1.11%, on the Nasdaq. The stock, however, slipped $15.67 or 6.41% in the after-hours trade.