Stock Market News: Ulta Looks Beautiful; lululemon Gets a Lift

Friday morning got off to a great start for the stock market, as investors reacted favorably to encouraging news on the employment front. Greater job creation than expected signaled that the U.S. economy has remained resilient, and some upbeat comments on the status of trade negotiations also put market participants in a good mood. As of 11 a.m. EST, the Dow Jones Industrial Average (DJINDICES: ^DJI) was up 305 points to 27,983. The S&P 500 (SNPINDEX: ^GSPC) rose 30 points to 3,148, and the Nasdaq Composite (NASDAQINDEX: ^IXIC) gained 82 points to 8,652.

Investors also got some good news on the earnings front, as Ulta Beauty (NASDAQ: ULTA) gave its latest results. Yoga specialist lululemon athletica (NASDAQ: LULU) isn’t due to report its quarterly results until next week, but analysts didn’t wait to weigh in with their thoughts about the stock.

Ulta paints a pretty picture

Shares of Ulta Beauty soared 11% after the beauty salon and products retailer announced its third-quarter financial results. Coming off some weakness earlier in the year, Ulta was able to reassure shareholders and restore some confidence in its future.

Image source: Ulta Beauty.

Ulta’s quarterly numbers were solid. Revenue was up almost 8% on a 3.2% rise in comparable sales from year-earlier levels. Earnings per share inched higher by 3% year over year. All of those figures were better than analysts had expected.

Investors also got an attractive outlook from Ulta. The company now expects to post a 10% increase in sales, with comps growth coming in between 4.7% and 5%. E-commerce growth should be between 20% and 30%, and Ulta plans to open 80 new stores, remodel or relocate 20 more, and make what it calls “store refreshes” to 270 additional locations.

Ulta shareholders got a shock earlier in the year when growth in high-end cosmetics sales suddenly slowed. The latest results haven’t returned the growth stock to its previous highs, but they marked a necessary step as Ulta hopes that the holiday season will have an even bigger impact on an eventual recovery.

A vote of confidence for Lululemon

Shares of Lululemon were close to unchanged on Friday morning. However, that didn’t reflect the more optimistic views that stock analysts had about the yoga apparel retailer as they look forward to its earnings release on Dec. 11.

Analysts at Deutsche Bank boosted their price target on Lululemon’s stock by $31 to $247 per share. Deutsche Bank believes that based on its own channel checks, investors are likely to see solid performance from Lululemon during the third quarter, including better earnings than most of Deutsche Bank’s peers currently expect. Expansion beyond traditional yoga apparel into areas like outerwear is also going well. Other Wall Street analysts have made similar boosts recently to their views on Lululemon.

Lululemon has done an extraordinary job of restoring its reputation and redefining the athletic leisure apparel movement. Having yoga practitioners as a core base of customers is highly lucrative, but Lululemon has also reached out to expand its target audience well beyond that niche. As more people get comfortable with its clothes, the Canadian company is becoming even more attractive.

With shares of Lululemon already above $230, Deutsche Bank’s target doesn’t give a lot of room for upside. Yet those gains could come quickly if Lululemon gives shareholders a positive surprise in its upcoming quarterly report.

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Dan Caplinger has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Lululemon Athletica. The Motley Fool recommends Ulta Beauty. The Motley Fool has a disclosure policy.

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