Ulta Beauty Earnings: Blemishes Remain Despite Fair Fourth-Quarter Profitability; Shares Attractive

Ulta Beauty’s fourth-quarter margins outperformed the estimates that we had revised upwards after its Jan. 6 announcement regarding a CEO change and updated guidance (see our note). On the downside, the firm continues to be pressured by the rapid rise in competition from the likes of wide-moat Amazon, TikTok Shop, and the Sephora partnership with no-moat Kohl’s. Indeed, Ulta posted a comparable sales increase of just 0.7% in 2024, and its 2025 guidance is slightly short of the expectations that we had already lowered after its October analyst event. Specifically, the firm guided to comparable sales growth of 0%-1%, an 11.7%-11.8% operating margin, and $22.50-$22.90 in earnings per share in 2025 versus our respective estimates of 1.5%, 11.9%, and $23.46.