Ulta Beauty boasts third-quarter success driven by holiday sales

Ulta Beauty’s third-quarter performance has exceeded fiscal expectations, pointing to a higher full-year outlook. The US beauty retailer’s Q3 net sales increased 1.7%, reporting US$2.53 billion, up from US$2.49 billion at this time last year.

“The Ulta Beauty team delivered better-than-expected sales and profitability, reflecting improved sales trends and strong financial discipline,” says Ulta Beauty CEO Dave Kimbell. “I am proud of the progress we’ve made and encouraged by early signs that our efforts to reinforce our market position and drive improved performance are gaining traction.”

Ulta Beauty’s third quarter ended on November 2, and the company reported quarterly earnings of US$5.14 per diluted share. The company raised its annual profit forecast from US$11.1 billion to US$11.2 billion.

Ulta Beauty says the expected annual profit per share will be between US$23.20 and US$23.75, up from the prior FY2024 outlook of US$22.60 to US$23.50.

Personal Care Insights previously reported on Wall Street’s division on Ulta Beauty’s long-term outlook going into the company’s Analyst Day on October 16. Ulta Beauty had just come off a lower-than-expected Q2 performance, the first time Ulta Beauty missed analyst expectations in four years.

Quarterly success

Since then, Ulta Beauty has shared a refreshed strategic framework to engage and meet the needs of beauty enthusiasts, said Kimbell during the Ulta earnings call on December 5. The company has also enhanced its brand portfolio, launching new offerings across makeup, wellness, and skin care categories.

The beauty retailers’ gross profit for Q3 FY2024 was US$1.0 billion compared to $992.1 million in Q3 FY2023. As a percentage of net sales, the gross profit decreased from 39.9% to 39.7%. This is attributed to inability to spread store and supply chain fixed costs as effectively, but Ulta says this is partially offset by favorable channel mix and improving inventory loss. 

The company reported US$199.7 million short-term debt at the end of Q3 this year, compared to US$195.4 million at the end of Q3 FY2023. Ulta Beauty says this is due to drawing on its revolving credit facility to support share repurchases, capital expenditures and growing merchandise inventory. 

Kimbell attributes the quarterly success to the start of a surging holiday season with several holidays sales expected through the end of the year. He also points to strength in the fragrance category, particularly men’s and gender-neutral fragrances, as well as new products. Body care also showed strong performance, “driven in large part by newer brand Sol de Janeiro,” he said.

Ulta expansion

Looking ahead, Kimbell said Ulta is continuing to expand in wellness with brands like The Honey Pot and Joylux. 

Japanese skin care brand Tatcha recently announced it is expanding to Ulta stores, adding to the retailer’s prestige beauty offerings. 

“As we look to the remainder of fiscal 2024, we are focused on executing with excellence across our key initiatives to deliver in a dynamic environment,” says Kimbell. 

“We remain confident that our model and strategies will drive long-term profitable growth and share leadership by enhancing our position as the destination for beauty enthusiasts for a lifetime.”