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Ulta Beauty Inc ULTA

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Morningstar’s Analysis

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1-Star Price

PREMIUM

5-Star Price

PREMIUM

Economic Moat

PREMIUM

Capital Allocation

PREMIUM

Narrow-Moat Ulta’s Q1 Results Were Beautiful but There Were Unusual Factors; Shares Very Overvalued

David Swartz Equity Analyst

Analyst Note

| David Swartz |

Like many others in the consumer cyclical sector, narrow-moat Ulta Beauty crushed all sales and earnings expectations in 2021’s first quarter as pent-up demand and government stimulus encouraged strong spending. However, we anticipate some of these factors will fade as the year progresses, and Ulta’s full-year guidance suggests as much, as its implied sales for the next three quarters are in line with our prior view. Regardless, we expect to raise our per share fair value estimate of $228 by a high-single-digit percentage on the first-quarter outperformance, though we view Ulta’s shares (trading at about 30 times projected 2021 EPS of just under $12) as overvalued.

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Company Profile

Business Description

Ulta Beauty is the largest specialized beauty retailer in the U.S. with approximately 1,300 stores. The firm offers makeup (44% of 2020 sales), fragrances, skincare, and haircare (20% of 2020 sales) products, and bath and body items. Ulta offers private-label products and merchandise from more than 500 vendors. It also offers salon services, including hair, makeup, skin, and brow services, in all stores. Most Ulta stores are approximately 10,000 square feet and are in suburban strip centers. Ulta was founded in 1990 and is based in Bolingbrook, Illinois.

Contact
1000 Remington Boulevard, Suite 120
Bolingbrook, IL, 60440
T +1 630 410-4800
Sector Consumer Cyclical
Industry Specialty Retail
Most Recent Earnings Apr 30, 2021
Fiscal Year End Jan 29, 2022
Stock Type Cyclical
Employees 37,000

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