Narrow-Moat Ulta Beauty’s Brand Power Outshines Others in Q2; Shares Expensive

Outperforming department store competitors that have suffered softer sales trends, Ulta Beauty posted stellar results in second-quarter 2022. Our narrow moat rating for the firm is partly based on its ability to reach a wide variety of consumers by stocking mass and prestige beauty brands, a characteristic that is serving it well in the current uncertain economic environment. We expect to lift our $323 fair value estimate by a mid-single-digit percentage due to its healthy results and outlook, but continue to view Ulta’s shares as expensive.