Ulta Beauty has revealed its guidance for fiscal 2025, which unfortunately fell short of Wall Street's expectations. This news opens up discussions about the future earnings potential within the beauty retail sector. Analysts from UBS provided insight in a note released on Friday, shedding light on the company's anticipated earnings per share (EPS) range of $22.50 to $22.90, which is below the consensus estimate of $23.51 put forth by UBS.
Furthermore, net sales are expected to fall between $11.5 billion and $11.6 billion, while analysts estimate a higher target of $11.68 billion as per FactSet data available at the end of February. Chief Financial Officer Paula Oyibo addressed this issue during a Thursday earnings call, pointing out that the current operating environment remains dynamic.
She stated, "As we navigate ongoing consumer uncertainty, we believe it is prudent to take a cautious approach to our guidance for fiscal 2025." Furthermore, Oyibo emphasized that the upcoming fiscal year is planned as a transition year for Ulta, a viewpoint she reiterated following their Investor Meeting held in October. Analysts have noted that Ulta is expecting a 10% increase in their selling, general, and administrative expenses for the year.
This cautious outlook could be seen as conservative, presenting a "potential upside risk to EPS estimates," according to UBS analysts led by Michael Lasser. Notably, Ulta's stock skyrocketed by 13% during Friday's trading, effectively reducing its year-to-date loss to 18%. In the short-term, Lasser remarked that the company has adeptly managed its EPS expectations for 2025.
He noted, "Ulta's guidance leaves room for positive estimate revisions over the next few quarters," implying that despite the initial setback, there remains hope for positive adjustments in the future. Moreover, Ulta envisions a "rational" promotional environment for the year ahead, indicating that they do not foresee significant impacts from tariffs in comparison to industry peers, which could bolster their profitability. However, UBS also highlighted that Ulta's guidance suggests ongoing pressures within its beauty category throughout the year, indicating that while the company is navigating challenges, there are also opportunities for growth and adjustment. For the fiscal fourth quarter, Ulta's EPS witnessed an increase to $8.46, up from $8.08 the previous year.
This performance surpassed the FactSet-polled estimate of $7.12. In terms of sales, the company reported a 1.9% decline to $3.49 billion, which still exceeded the analytical estimate of $3.47 billion. With a current stock price of $344.68, reflecting a change of +30.21, and a percent change of +9.61, the market attentively watches Ulta Beauty's strategies moving forward..