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.