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Ulta Beauty Inc ULTA

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Morningstar’s Analysis

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Narrow-Moat Ulta Beauty Marginally Outperformed Low Expectations in Q2; Shares Fully Valued

David Swartz Equity Analyst

Analyst Note

| David Swartz |

Narrow-moat Ulta Beauty’s 2020 second-quarter sales and earnings came in slightly above our view as 200% e-commerce growth offset some of the impact of virus-related store closures. The firm, however, guided to a slower rebound in second-half sales than we had anticipated due to the pandemic, a pullback of promotional events, and holiday season discounting. It indicated that same-store sales may decline 10%-15% in the second half, whereas we had forecast comparable sales growth in the low single digits. We think there may be upside to Ulta’s guidance as its August same-store sales have only declined in the mid single digits. Regardless, we do not expect to make any material change to our fair value estimate of $214 per share on Ulta. We view it as overpriced after its mid-teen percentage price jump in post-market trading.

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Company Profile

Business Description

Ulta Beauty is the largest specialized beauty retailer in the U.S. with more than 1,250 stores. The firm offers makeup (about 50% of sales), fragrances, skincare and haircare products, and bath and body products. 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.

1000 Remington Boulevard, Suite 120
Bolingbrook, IL, 60440
T +1 630 410-4800
Sector Consumer Cyclical
Industry Specialty Retail
Most Recent Earnings Jul 31, 2020
Fiscal Year End Jan 30, 2021
Stock Type Cyclical
Employees 44,000