Ulta Beauty annual sales and profit forecasts was cut on Thursday, hurt by slowing demand for higher-priced cosmetics and fragrances at its stores. There is a dip in demand for beauty in U.S. as consumers cut back on makeup and cosmetics in the face of higher prices and elevated borrowing costs.
(Image Credit: ulta)
Ulta’s shares, which have already fallen about 22% this year, were down 7% in extended trading. Ulta has seen swift sales in recent years, but the demand has weakened as shoppers pull back on discretionary purchases. The company is also facing more competition from rivals like Sephora, Target Corp., Walmart Inc. and online sellers such as Amazon Inc.
Dip in beauty demand
Once pandemic-related restrictions were lifted in the U.S., people initially splurged on affordable luxury products, particularly in the beauty category, but with costs of living still remaining high customers are now even cutting back on cosmetics and skincare as well.
MAC lipstick maker Estee Lauder also forecast annual profits and sales below market expectations, citing reduced demand for its luxury beauty products in the key China market.
Bath & Body Works Inc., which also sells makeup and shampoo, lowered its revenue guidance for the year on Wednesday. The company said its store traffic has been pressured as US shoppers grow increasingly cautious about spending.
Dip in Ulta sales
Ulta Beauty’s Q2 comparable sales fell 1.2%, driven by a 1.8% decrease in transactions.
Customer traffic at Ulta Beauty in the U..S moderated in recent months, as per report.
“Our second quarter performance did not meet our expectations,” said CEO Dave Kimbell, adding that the company has updated its annual expectations due to a more cautious outlook.
Ulta Beauty’s quarterly net sales rose roughly 1% to $2.55 billion in the second quarter, missing LSEG expectations of $2.62 billion.
The beauty retailer, Ulta earned $5.30 per share, compared with expectations of $5.46.
Ulta’s sales forecast
It sees annual net sales between $11 billion and $11.20 billion, versus prior expectations of $11.5 billion to $11.6 billion.
The company forecast annual earnings per share between $22.60 and $23.50, compared with its earlier expectation of $25.20 to $26.00.
Cautious shopper
“Consumer behavior is starting to shift as consumers increasingly focus on value, and become more cautious with their spending,” Ulta’s Chief Executive Officer Dave Kimbell said on a conference call. “Our market share continues to be challenged” particularly for prestige makeup and hair care items, he said.
Sales moderated during the quarter as promotions boosted online sales but failed to drive store traffic.
Increased competition
Kimbell said pressures will likely continue in the near term, with more competitors opening more stores near Ulta locations. The beauty retailer has 1,411 stores across the US, and plans to add as many as 65 net new locations this year.
Ulta’s stock drop
The share price of Ulta was $341.01, down by 7% postmarket trading in New York as of 5:55 p.m. Through Thursday’s close, the stock had dropped 25 percent this year.
