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Ulta Beauty Inc ULTA

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Narrow-Moat Ulta’s Q3 Sales Were in Line but the Pandemic Remains Worrisome; Shares Overvalued

David Swartz Equity Analyst

Analyst Note

| David Swartz |

Narrow-moat Ulta Beauty continues to feel the effects of the pandemic as its comparable sales dropped 8.9% in 2020's third quarter. Yet, this result was much improved from the previous quarter’s same-store sales decline of 26.7%. We expect to increase our per share fair value estimate on Ulta of $214 by a low-single-digit percentage but view shares as overvalued. With more than 1,260 stores (that normally produce more than 80% of its sales), Ulta faces challenges from virus-related restrictions and consumers’ hesitancy to visit stores. The firm projected a fourth-quarter same-store sales decline of 12%-14%, in line with our prior estimate of a 13.0% drop.

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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 Oct 31, 2020
Fiscal Year End Jan 30, 2021
Stock Type Cyclical
Employees 44,000