Ulta Beauty to Come Up With Q3 Earnings: Is a Beat Likely for ULTA?

Core Viewpoint - Ulta Beauty, Inc. is expected to report a decline in both revenue and earnings for the third quarter of fiscal 2024, with projected revenues of $2.48 billion, reflecting a 0.3% decrease year-over-year, and earnings per share estimated at $4.45, indicating a 12.2% decline from the previous year [1][3]. Group 1: Factors Influencing Results - Shifting consumer behavior towards value-driven spending and increased competition from new beauty distribution channels are eroding Ulta's market share [3][4]. - The U.S. beauty sales growth has slowed to just 3% in the first half of 2024, impacting Ulta significantly as consumers prioritize value over premium products amid inflation and economic uncertainties [4]. - The company's transition to a new Enterprise Resource Planning system has caused operational disruptions, and promotional efforts have not met expectations for in-store sales [3][4]. Group 2: Financial Projections - Comparable sales are projected to decline by 1.9% for the quarter under review [4]. - Soft merchandise margins and elevated selling, general and administrative (SG&A) costs are concerns, with SG&A expenses expected to increase by 5.3% for the third quarter, raising the rate to 27.9% [5]. Group 3: Positive Aspects - Ulta Beauty is focusing on strengthening its product assortment, enhancing digital experiences, and leveraging its loyalty program, which may aid in mitigating some challenges [6]. - Growth in the skincare category is noted, driven by rising consumer interest in self-care and the company's emphasis on innovation [6]. Group 4: Earnings Prediction - The current model does not predict an earnings beat for Ulta Beauty, as it holds a Zacks Rank of 3 and an Earnings ESP of 0.00% [7].