Earnings preview: Ulta Beauty set to charm the market with solid Q2 results

Cosmetics retailer Ulta Beauty, Inc. (Nasdaq: ULTA) was successful in beating the general weakness the industry witnessed last year. It has also been resilient to the multiple headwinds that continue to cause volatility in the broader retail sector. (check for live updates of actual results)

After the outstanding performance in recent quarters, the company is preparing to publish its second-quarter earnings report Thursday after the closing bell. On average, analysts forecast earnings of $2.8 per share for the July-quarter, up 14% year-over-year. Revenues are seen growing by 12.8% to $1.68 billion.

With international expansion gaining momentum aided by strategic investments in growth initiatives, Ulta Beauty is on track to become a global brand. As a first step, preparations are underway for its launch in Canada. The fact that the company expanded its store base steadily over the last year, despite adverse market conditions, underscores the stable demand for its products and services.

The Comps Push

Comparable sales growth is estimated to have accelerated in the second quarter, aided by the steady rise in store-traffic and ticket growth. There has been an uptick in the demand for the spa and beauty specialist’s popular skincare products and cosmetics. In all likelihood, the company further expanded its member base in the to-be-reported quarter, thanks to the promotional activities and loyalty program that keeps attracting customers with new offers and brand additions.

Related: Ulta Beauty Q1 2019 Earnings Call Transcript

Ulta Beauty’s online platform underwent a transformation in recent months, offering improved customer experience through the revamped distribution network and prompt delivery. Overall, more and more shoppers find the company’s omnichannel capabilities appealing. Since the merchandise mostly comprises high-margin items, the strong volumes would translate into profit growth.

Q1 Numbers

For the first quarter of 2019, the company reported double-digit increase in sales and earnings to $1.74 billion and $3.26 per share respectively. The results benefitted from a 7% same-store sales growth, which was however slightly below the previous year’s level.

Also see: what to expect from Dollar Tree’s Q2 report

After slipping to a five-month low in the final weeks of last year, Ulta Beauty shares gained steadily and reached a new peak last month. The stock has gained 32% since the beginning of the year, outperforming the S&P 500 index. It traded higher during Thursday’s regular session.

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