Ulta Beauty: CEO Transition Is Unexpected but Should Be Smooth; Shares Overvalued

Narrow-moat Ulta announced that effective immediately, Dave Kimbell has retired as CEO and board member and has been replaced by Kecia Steelman. Although there was no prior indication that Kimbell was planning to move on, the change should be smooth as Steelman has been with Ulta for over 10 years and has served as president and chief operating officer since 2023. Indeed, she was one of the featured speakers at Ulta’s analyst event in October. Moreover, Kimbell, who had also been company president before succeeding Mary Dillon as CEO in 2021, will remain an advisor through June. We think Kimbell was an effective CEO, but Ulta’s results over the past year have been rocky due partly to heightened competition in prestige beauty. We are maintaining our Exemplary Capital Allocation Rating, which is based on Ulta’s debt-free balance sheet and history of high internal investment returns.