The beauty industry is bracing for a challenging year ahead, as evidenced by Ulta Beauty's recent financial forecasts. On Thursday, the retailer announced a more pessimistic outlook for full-year profit and revenue than Wall Street had anticipated, despite posting strong results for the holiday quarter that exceeded analyst expectations. Under the leadership of newly appointed CEO Kecia Steelman, who took the helm in January, Ulta is predicting that comparable sales will remain flat or grow by just 1% in 2025. This is notably lower than the 1.2% growth analysts had anticipated, according to data from StreetAccount.
Ulta Beauty's report included several key financial metrics that highlighted its recent performance. The company expects full-year earnings to fall between $22.50 and $22.90 per share, which is below the market expectation of $23.47, as reported by LSEG. In the fiscal fourth quarter, Ulta achieved an impressive earnings per share of $8.46, surpassing the expected $7.12. Revenue also exceeded expectations, coming in at $3.49 billion compared to the anticipated $3.46 billion.
During the three-month period ending February 1, Ulta reported a net income of $393 million, or $8.46 per share, slightly down from $394 million, or $8.08 per share, during the same time last year. However, sales declined by approximately 2%, from $3.55 billion to $3.49 billion year-over-year. This decline can be partly attributed to the effects of an extra selling week in the previous year, which has skewed year-over-year comparisons negatively.
In January, Ulta announced a leadership transition, with longtime CEO Dave Kimbell being replaced by Kecia Steelman, who previously served as Chief Operating Officer. Steelman, who has been with the retailer for over a decade, expressed pride in the company’s performance but acknowledged that there is still significant work to be done. She emphasized the importance of fiscal 2025 as a pivotal year for Ulta, stating, "We will make purposeful investments to fuel our future growth and move quickly to optimize our business."
Steelman did not provide specific insights into quarter-to-date trends or the assumptions behind the company's guidance. However, she expressed confidence that the investments made will help reignite momentum and unlock long-term value for shareholders.
During the holiday quarter, Ulta experienced a 1.5% increase in comparable sales, exceeding the expected growth of 0.8% as per StreetAccount. This growth was fueled by a 3% increase in the average transaction value, although the total number of shoppers visiting Ulta stores decreased, resulting in a 1.4% decline in transactions. This decrease is indicative of heightened competition in the beauty market, as Ulta faces challenges not only from rivals like Sephora but also from mass retailers such as Macy's, Walmart, and Amazon, all of which have made significant investments in their beauty product offerings.
While Ulta has previously cautioned about a cooling beauty market, competitors like E.l.f. Beauty and Oddity have not experienced the same downturn. Additionally, beauty sales at major retailers such as Macy's and Target have remained robust, suggesting that the overall market dynamics may be shifting.
Despite the competitive pressures and the fluctuating market conditions, Ulta has successfully prioritized profitability. The retailer managed to grow its earnings during the holiday quarter, even with one less selling week compared to the previous year. As Ulta navigates the complexities of the beauty industry, its strategic focus on profitability and future investments may be key to sustaining its growth trajectory.
