Ulta Beauty (ULTA) Stock Plummets 8% Despite Revenue Win on Weak Forward Outlook

TLDR

• Fourth-quarter revenue reached $3.90B, surpassing the $3.80B forecast, while EPS of $8.01 fell slightly short of the $8.03 target.
• Year-over-year net sales increased 11.8% in Q4, supported by a 5.8% rise in comparable sales.
• Forward-looking fiscal 2026 EPS projections of $28.05–$28.55 missed analyst targets of $28.40–$28.57.
• SG&A expenses surged 23% to reach $1 billion, attributed to increased corporate spending and marketing investments.
• Raymond James maintained its Strong Buy recommendation, suggesting any additional decline presents a purchase opportunity.

Ulta Beauty (ULTA) delivered a split fourth-quarter performance on Thursday, exceeding revenue projections while falling marginally short on earnings — but it was the underwhelming fiscal 2026 forecast that triggered an approximately 8% after-hours stock decline.

In the quarter that concluded January 31, the beauty retailer generated $3.90 billion in revenue, surpassing the Street’s $3.80 billion projection. However, earnings per share landed at $8.01, narrowly below the anticipated $8.03.

Ulta Beauty, Inc., ULTA

The quarter saw comparable sales advance 5.8%. This improvement stemmed from a 4.2% boost in average transaction value combined with a 1.6% uptick in customer transactions.

Total net sales expanded 11.8% compared to the same period last year. Multiple factors contributed to this growth, including improved comparable sales performance, the Space NK acquisition, and revenue from newly opened locations.

For the complete fiscal 2025 period, the company recorded net sales of $12.4 billion, representing a 9.7% year-over-year gain.

Guidance Disappoints

The primary concern emerged from the company’s forward projections. For fiscal 2026, management forecasts net sales growth between 6% and 7%, with comparable sales rising 2.5% to 3.5%.

Regarding profitability, Ulta’s fiscal 2026 EPS guidance ranges from $28.05 to $28.55. The $28.30 midpoint fell below Wall Street’s consensus estimates of approximately $28.40 to $28.57.

According to Raymond James analyst Olivia Tong, while the guidance “captured consensus expectations,” she observed that buy-side projections had been more optimistic. She also highlighted heightened spending during the quarter as contributing to the after-hours selloff.

Despite the reaction, Tong maintained her Strong Buy stance, characterizing any additional weakness as “a buying opportunity.”

Morgan Stanley’s Simeon Gutman indicated that near-term upside potential for Ulta hinges on the company’s capacity to “consistently sustain comp outperformance and provide clearer visibility on disciplined cost management.”

Costs Rise

Gross profit climbed 11.2% to $1.5 billion, while gross margin dipped modestly to 38.1% from 38.2% in the previous year. Management cited an unfavorable product mix and elevated store-related expenses as headwinds, partially balanced by reduced shrinkage and supply chain improvements.

Selling, general and administrative costs escalated 23% to $1 billion. This expansion reflected higher corporate overhead associated with strategic initiatives, amplified advertising expenditures, and increased performance-based compensation.

CEO Kecia Steelman highlighted execution excellence and innovative merchandising approaches as key performance drivers. She emphasized the organization’s commitment to enhancing customer experiences through “compelling newness” and “more seamless and convenient” shopping options.

This marked the inaugural earnings announcement since Christopher DelOrefice assumed the CFO position in early December.

Oppenheimer analysts had anticipated “solid” fourth-quarter performance heading into the release, and revenue results validated those expectations. The stock’s negative reaction appears centered on investor uncertainty about whether the 2026 guidance represents conservative planning or signals actual growth deceleration.

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Source: https://blockonomi.com/ulta-beauty-ulta-stock-plummets-8-despite-revenue-win-on-weak-forward-outlook/