Ulta Slides as Forecast Miss Takes Shine Off CEO Transition

Ulta Beauty Inc.’s shares plunged after the beauty retailer announced a sales outlook that fell short of Wall Street’s estimates and an upcoming change of leadership.

Chief Executive Officer Mary Dillon plans to step down after the company’s June 2 shareholder meeting and move to the role of executive chair, Ulta said Thursday in a statement alongside its fourth-quarter earnings report. President Dave Kimbell will move into the CEO role, while Kecia Steelman, the company’s chief store operations officer, will become chief operating officer.

“It’s the right time for me and for the company,” Dillon said in an interview. She said the company was coming off a “tough year” but it has “strong momentum and optimism about the future and a team that’s really ready to build the next 10 years of strategies and growth.”

The shares fell as much as 12% after regular trading in New York.

Ulta Slides as Forecast Miss Takes Shine Off CEO Transition

The leadership transition caps a nearly eight-year run for Dillon as the top boss, during which she sought to bolster Ulta’s retail network and expand digital platforms like GlamLab. Since she was named CEO, Ulta’s stock has gained more than 250%, outpacing the broader market.

The pandemic has battered retailers over the past year and hurt sales of color cosmetics like lipstick, which make less sense in an era of mask-wearing. Dillon sees this starting to change.

“We do sense this almost butterfly coming out of the cocoon soon as people are getting more confident and ready to go out,” said Dillon, who plans to stay in the executive chair role for one year.

Ulta Slides as Forecast Miss Takes Shine Off CEO Transition

Ulta’s reinstated guidance shows the challenges that remain. Net revenue will be in the range of $7.2 billion to $7.3 billion for this fiscal year, the company said in a statement. Even at the high end, that’s short of analysts’ average expectation of $7.33 billion. Comparable sales will jump as much as 17% from last year’s low levels.

While demand remains depressed, the company’s fourth-quarter performance still topped Wall Street’s expectations. Net sales in the quarter ended Jan. 30 slid 4.6% to $2.2 billion, Ulta said, beating the $2.07 billion average of analysts’ estimates compiled by Bloomberg. Adjusted earnings were $3.41 a share.

Sales Slide

Comparable sales, a key gauge of performance for retailers, fell 4.8%. Thanks to higher at-home consumption of skincare and haircare products, the performance was better than the company’s earlier projection of a double-digit decline, Dillon said.

Ulta is confident in its ability to ride momentum in areas like skincare, which has proved resilient through the pandemic. Color cosmetics will be the critical factor, and that will depend on how quickly the world transitions back to normal, Kimbell said in an interview.

“The biggest uncertainty is that point of people feeling increasingly comfortable going out,” he said. “We know there’s demand for it.”

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