Ulta Slides as Mask-Wearing Consumers Steer Clear of Makeup

(Bloomberg) -- Ulta Beauty Inc. shares fell in late trading after its third-quarter results showed a murkier path to recovery as consumers choose to stockpile groceries over make-up.

• Same-store sales, a key gauge of retail performance, fell 8.9%, the company said Thursday. While the losses were better than the 9.7% decline analysts expected, Ulta’s results show the challenges caused by the pandemic are far from over. The retailer expects comparable-store sales for its holiday quarter to fall 12% to 14%, which is similar to declines early in the pandemic.

Key Insights

• The outlook remains stubbornly difficult for cosmetics retailers -- especially one that has made the experience of going to the store central to its strategy. Even so, Ulta is pushing ahead with expansion plans, with an estimate of 30 new stores both this fiscal year and next. The company last month announced plans to open more than 100 mini-stores in Target locations beginning in 2021.
• Ulta’s profitability has eroded as sales slow and shift to e-commerce and away from in-store, driving costs up. Gross profit and operating income also declined.
• The cost of operating during Covid-19 also remains high. The company expects to pay as much as $190 million on protective equipment and other safety measures at its more than 1,000 stores.

Market Reaction

• The shares fell 5.9% as of 4:37 p.m. after regular trading in New York. The stock climbed 14% this year through Thursday’s close, slightly higher than the advance of the S&P 500 Index over the same period.
• Click here for company statement

©2020 Bloomberg L.P.