) missed the Zacks Consensus for the first time in 5 years last
week. Investors have punished this Zacks Rank #5 (Strong Sell) by
crushing its shares by about 30%. Is it really that bad at Ulta?
Ulta operates 664 beauty retail stores across the United States and
an e-commerce web site. It offers 20,000 affordable cosmetics and
beauty products, as well as full-service salon capabilities.
The Miss Heard Around the World
If there was one thing to count on, it was Ulta's earnings track
record. It hadn't missed the Zacks Consensus in 5 years.
But on Dec 5, that streak came to a sudden end as Ulta reported
earnings of $0.72, two cents under the Zacks Consensus.
Sales rose 22.4% to $618.8 million from $505.6 million in the year
ago quarter. Comparable store sales gained 6.8%.
The redesign of the web site was finally completed this quarter.
This was a large part of the company's strategy and appears to be
paying off as e-commerce sales grew 74.4% and represented 170 basis
points of the 6.8% same store sales increase.
Ulta also opened 55 new stores in the quarter compared to 49 new
stores in the third quarter of 2012.
But the earnings miss loomed large.
Lowered Guidance for Q4
Ulta gave guidance for the fiscal fourth quarter of $1.07 to $1.10.
This is lower than previous expectations due to the believe that
the softer retail trends at the end of the third quarter would
continue in the fourth quarter and the anticipation of a highly
promotional holiday shopping season.
The Zacks Consensus had been looking for $1.25. 6 estimates have
already been lowered since the earnings report, pushing the Zacks
Consensus down to $1.09, which is now inline with the company's
Analysts also lowered estimates for the full fiscal year and fiscal
2014. The Zacks Consensus for fiscal 2013 fell to $3.25 from $3.33
in the last week.
The Zacks Consensus on fiscal 2014 was also chopped to $4.03 from
Fourth quarter same store sales are expected to rise 7% to 9%,
including sales from the newly designed web site.
Shares plunged on the earnings miss and continue to sell off.
They're now down about 30% from where they were trading before the
Even with the plunge, Ulta's shares aren't exactly cheap. They're
still trading with a forward P/E of 28.
However, double digit earnings growth is expected for both this
year and next year with earnings expected to rise another 24% in
If you're interested in a retailer with a consistent earnings track
record which is a Zacks Rank Buy, you might want to consider
). It has beat for 5 years in a row, is also expected to grow
earnings by the double digits and is a Zacks Rank #2 (Buy).
[In full disclosure, the author of this article owns shares of
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