Ulta Beauty Is Nearly a $12 Billion Business. And 95% of This Comes From 1 Source.

Core Insights - Ulta Beauty is a leading cosmetics retailer with approximately 1,400 locations and projected net sales of at least $11.5 billion for the year, indicating significant market presence [1] - The company differentiates itself by offering exclusive products and in-store services, which helps maintain customer loyalty and foot traffic [2] - As of Q1 2024, Ulta Beauty has over 43 million active loyalty members, with 95% of sales generated from this customer base, highlighting the importance of loyalty in its business model [3][4] Sales and Growth Projections - Management initially forecasted net sales of $11.7 billion to $11.8 billion for 2024, representing a modest growth of 4% to 5% from 2023, but later revised this estimate down to $11.5 billion to $11.6 billion [5] - The cosmetics industry faces low barriers to entry, with new competitors frequently emerging, which poses a risk to Ulta Beauty's market share [6] - 2024 is expected to be a slow growth year for the cosmetics sector, contributing to investor hesitance regarding Ulta Beauty's stock [7] Investment Considerations - Despite concerns about market share loss, the strong loyalty program suggests that Ulta Beauty can retain a significant portion of its customer base, making the stock an attractive buy [9] - The company has been actively repurchasing shares, spending nearly $300 million in Q1, with an additional $1.8 billion authorized for future buybacks, indicating confidence in the stock's value [10] - Share repurchases are generally more beneficial when the stock is undervalued, as is the case with Ulta Beauty, presenting a favorable opportunity for long-term investors [11][12]