Markets
BBW

Ulta Beauty (ULTA) Surpasses Industry: What's Driving it?

Tablet displaying intraday stock performance

Ulta Beauty, Inc.ULTA has been in investors' good books for quite some time now, given its robust earnings history, solid stock momentum and sound operational strategies. Further, the company has a long-term earnings growth rate of 20.4% that suggests holding on to the stock.

Let's look into some of the factors that have been aiding Ulta Beauty's growth and helping it to sustain as a safe bet.

Solid Stock Momentum

The leading beauty retailer surpassed the Zacks categorized Retail-Miscellaneous/Diversified industry in the past six months. In the said time frame, shares of the company advanced 10.6% compared with the industry's decline of 8.2%.

Splendid Earnings History

Ulta Beauty has been delivering better-than-expected top and bottom line results consistently for over three years now. The company posted stellar first-quarter fiscal 2017 results, which marked its 14th straight quarter of earnings and sales beat. Moreover, results grew year over year fueled by efficient execution of the company's growth plans, constant merchandise innovations, solid marketing initiatives, favorable store traffic and continued progress at the company's salon operations. Encouraged by the sturdy results, management perked up its fiscal 2017 guidance.

Wide Portfolio of Beauty Products

Ulta Beauty prides itself for being a one-stop shop for beauty enthusiasts. It features prestigious and discounted brands and offers salon products and services under one roof. Further, the company remains keen on enhancing beauty products offerings, while improving store traffic with superior customer services. The company added 69 new brands and executed more than 500 prestige brand expansions across new and existing stores in fiscal 2016. Adding to its portfolio of prestige brands, the beauty retailer plans to roll out Estee lauder's EL most popular MAC brand in its store and expand it to about 100 stores by the end of fiscal 2017.

Store Expansion and eCommerce

Ulta Beauty is known for striking the right balance between online and physical stores. While key players in the retail industry are struggling due to rising competition from online retailers, Ulta Beauty has managed to grow eCommerce and in-store sales. Notably, the company registered a whopping 70.9% growth in eCommerce sales in first-quarter 2017, which marked its highest ever quarterly growth since 2014. Encouraged by such a performance, the company is focused on strengthening eCommerce business by enhancing supply chain capabilities.

Further, Ulta Beauty is inclined to growing store base. Evidently, the company has expanded to operating 990 stores as of the end of first-quarter fiscal 2017 and plans to open another 100 stores in fiscal 2017. So far the company has been opening stores in the suburban regions while taking advantage of lower rents and leaner competition. However, it is ready to explore the urban markets as is evident from its recent plans to open about five stores in urban locations like Manhattan, Chicago, California etc.

Bottom Line

While the company's limited global brand awareness is a major concern for the company, we believe Ulta Beauty can easily overcome these challenges backed by its sturdy growth plans.

Other Key Picks

Investors may also want to consider a few other retail stocks that are at pace with Ulta Beauty. This includes, Big 5 Sporting Goods Corporation BGFV and Build-A-Bear Workshop, Inc. BBW .

Big 5 Sporting delivered an average positive earnings surprise of 94.5% over the trailing four quarters and a long-term earnings growth rate of 9%.

Build-A-Bear Workshop delivered an average positive earnings surprise of 67.5% over the trailing four quarters and a long-term earnings growth rate of 22.5%.

The Best & Worst of Zacks

Today you are invited to download the full, up-to-the-minute list of 220 Zacks Rank #1 ""Strong Buys"" free of charge. From 1988 through 2015 this list has averaged a stellar gain of +25% per year. Plus, you may download 220 Zacks Rank #5 ""Strong Sells."" Even though this list holds many stocks that seem to be solid, it has historically performed 6X worse than the market. See these critical buys and sells free >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Estee Lauder Companies, Inc. (The) (EL): Free Stock Analysis Report

Big 5 Sporting Goods Corporation (BGFV): Free Stock Analysis Report

Ulta Beauty Inc. (ULTA): Free Stock Analysis Report

Build-A-Bear Workshop, Inc. (BBW): Free Stock Analysis Report

To read this article on Zacks.com click here.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story

BBW BGFV ULTA EL

Other Topics

Stocks

Latest Markets Videos

    Zacks

    Zacks is the leading investment research firm focusing on stock research, analysis and recommendations. In 1978, our founder discovered the power of earnings estimate revisions to enable profitable investment decisions. Today, that discovery is still the heart of the Zacks Rank. A wealth of resources for individual investors is available at www.zacks.com.

    Learn More