Ulta Beauty (NASDAQ:ULTA) reported second-quarter earnings that fell short of analyst expectations, while also cutting its full-year outlook, sending shares down more than 6% in premarket trading Friday.
The beauty retailer posted adjusted earnings per share of $5.30, missing the analyst consensus of $5.51. Revenue grew 0.9% YoY to $2.55 billion, but fell short of estimates of $2.62 billion.
Comparable sales decreased 1.2%, compared to an 8.0% increase in the same quarter last year.
Ulta Beauty significantly lowered its fiscal 2024 guidance, now expecting EPS of $22.60-$23.50, well below the previous analyst consensus of $25.26.
The company also reduced its full-year revenue forecast to $11-11.2 billion, down from the $11.495 billion analysts were expecting.
CEO Dave Kimbell acknowledged the disappointing results, stating, "While we are encouraged by many positive indicators across our business, our second quarter performance did not meet our expectations, driven primarily by a decline in comparable store sales."
The company's gross profit margin contracted to 38.3% from 39.3% a year ago, primarily due to lower merchandise margins and deleverage of store fixed costs.
Operating income fell to $329.2 million, or 12.9% of net sales, compared to $391.6 million, or 15.5% of net sales in the prior-year period.
Despite the challenges, Ulta Beauty continued its share repurchase program, buying back 549,852 shares at a cost of $212.3 million during the quarter.
The company also expanded its store network, operating 1,411 stores at the end of the quarter, a net increase of 49 stores from the same period last year.
Following the report's release, Stifel analysts lowered their ULTA estimates and price target, from $475 to $385, citing a demanding market share outlook.
"The company said comp trends weakened through F2Q24 while promotions increased, suggesting the magnitude of challenges facing Ulta to improve share/comp trends," Stifel noted.
"Updated guidance contemplates comp is consistent (at best) with flat F2H24 comp trends, suggesting share loss is likely to continue into F2025, in our view."
Meanwhile, BMO Capital Markets analysts believe ULTA continues to be a "compelling business in an attractive sector," but they prefer to stay on the sidelines while awaiting "visibility on competition/distribution and determining the sales and margin floor."
Senad Karaahmetovic contributed to this report.