Analyst Sees Ulta Beauty's Q2 Outperformance Driven By Shifting Beauty Trends

Core Viewpoint - JP Morgan analyst Christopher Horvers maintains an Overweight rating on Ulta Beauty, Inc., indicating expectations for stronger second-quarter performance than current market forecasts [1] Group 1: Sales Performance - Recent data shows a positive shift in beauty product sales within Food, Drug, and Mass (FDM) channels, with a slight increase of +0.1% for the four weeks ending June 14, improving from a prior month's -1.2% [1][2] - Ulta Beauty's same-store sales have a significant correlation with broader beauty market data, showing a 65% correlation with NielsenIQ's cosmetics data and 53% with overall beauty data [2] Group 2: Growth Projections - Horvers projects a second-quarter growth range of +4% to +7% for Ulta Beauty, which is significantly higher than the Consensus Metrix estimate of +2.1% and his previous projection of +2.0% [3] - Circana data also suggests a potential second-quarter growth range of +2.5% to +7%, with Horvers' Ulta Beauty index centered between +5% and +7% [4] Group 3: Management Guidance - Ulta Beauty previously communicated expectations for comparable sales to remain consistent throughout the year, with the second and third quarters anticipated to outperform due to easier year-over-year comparisons [5] - These easier comparisons are attributed to less effective promotions, an ERP-related disruption, and a surge in competitive store openings since 2021 [5]