Hurricanes and makeup slowdown hit Ulta Beauty but Q3 is still big success story

Beauty specialty retailer Ulta Beauty reported on Thursday another positive third quarter that included a net income increase of 19.5 percent to $104.6 million despite its core makeup category slowing down.
 
Ulta Beauty reports strong Q3 results, income up 19.5%. - Facebook: Ulta Beauty

Net sales were up 18.6 percent to $1,342.2 million, compared to $1,131.2 million reported in the third quarter which ended October 28, 2017. Comparable sales increased 10.3 percent, while e-commerce sales impressed the most growing 62.9 percent to $119.8 million, from $73.6 million.
 
Meanwhile, retail comparable sales increased 8.6 percent, including salon comparable sales growth of 7.1 percent.
 
“We flexed our merchandising and marketing plans, leveraged our consumer insights and CRM platform, and worked with our brand partners to create compelling offers for our guests. We also benefitted from the unmatched breadth of beauty categories and products we offer,” explained CEO, Mary Dillon, who also did not fail to mention that the company was impacted by hurricanes during the quarter, as well as suffered from slower growth in its makeup category.

MAKEUP AND SKINCARE

A makeup slowdown? That’s big news but the company said very little about it in the results report. However, on a later conference call, Dillon opened up a bit more and its seems that make-up has weakened a little due to “a bit of a lull in innovation [in] colour cosmetics.” 

But that is not the case for all brands with Dillon adding that the star quartet of Clinique, Lanôme, Mac and Benefit were “very strong, as we continue to roll out 700 boutiques this year. These four high-growth brands contributed almost a third of our total comp growth during the quarter. We are delighted with our new partnership with Mac.”

She also said the firm’s loyalty program continues to deliver “significant benefits" as well over 90% of its sales being captured through the program with active member numbers soaring.

The company also made the most of rising skincare sales in September by adding the category into the usually-makeup-focused 21 Days of Beauty event. This helped it in its aim of “migrating customers from a primarily mass basket to a richer basket blending mass and prestige items.” 

And that aim seems to be working. In the year-to-date, Ulta grew the prestige segment by 28%, outstripping overall prestige market growth that’s down in single-digits.

In the first nine months of 2017, Ulta opened 86 new stores, relocated five locations and remodeled 10 other locations.
 
For the fourth quarter of fiscal 2017, the company currently expects net sales in the range of $1,926 million to $1,959 million. Meanwhile, comparable sales, including e-commerce sales, are expected to increase 8 to 10 percent. 
 
For fiscal 2017. the company expects to achieve comparable sales growth of approximately 10 to 11 percent, including the impact of its e-commerce business.

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