Why Ulta Beauty Stock Jumped Today

What happened

Shares of Ulta Beauty (NASDAQ: ULTA) popped 12.5% on Friday after the cosmetics retailer’s earnings came in far above investors’ expectations.

So what

Ulta’s net sales climbed 21% year over year to $2.3 billion in its fiscal first quarter, which ended on April 30.

Traffic rose 10% as people returned to the beauty-focused company’s stores after coronavirus-related restrictions were lifted. Additionally, Ulta’s average ticket price increased by 7.3%, as shoppers spent more during their visits. Together, this drove an 18% rise in Ulta’s comparable sales.

“Solid execution of our strategies, paired with strong guest demand, fueled our financial performance and continued market share gains,” CEO Dave Kimbell said in a press release.

Image source: Getty Images.

Ulta’s profitability improved along with its sales. The company’s gross margin expanded to 40.1% compared to 38.9% in the prior-year period, while its operating margin checked in at 18.7%, up from 15.8%.

All told, Ulta’s net income surged 44% to $331.4 million. And its earnings per share, which were boosted by stock buybacks, soared 54% to $6.30. That crushed Wall Street’s estimates, which had called for per-share profits of $4.46.

Now what

With people returning to traditional work locations and attending more social events, they’re increasing their spending on items that can improve their appearance. This includes skin and hair care products, as well as other cosmetics. As a leading beauty products retailer, Ulta stands to benefit from this trend perhaps more than any other company.

The retailer’s management appears to agree. Ulta boosted its full-year earnings forecast to $19.20-$20.10 per share, up from a prior estimate of $18.20 to $18.70.

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Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Ulta Beauty. The Motley Fool has a disclosure policy.

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