Ulta Salon (ULTA) Plunges On Weak First Quarter Guidance

Shares of Ulta Salon, Cosmetic & Fragrance (ULTA) recently plunged, after the beauty retailer reported fourth quarter earnings that topped analyst estimates but offered weak guidance for the current quarter. Ulta operates full service salons, which feature hair services, pedicures, manicures and massages. It also sells beauty care products, such as make-up, fragrances, as well as skin and hair care products.

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For its fourth quarter, Ulta earned $1.00 per share, or $64.5 million, up from $0.73 per share, or $46.3 million, it earned in the prior year quarter. This topped the consensus estimate of $0.98 per share by two cents. Revenue rose 30.3% from $582.5 million to $758.8 million, also beating the consensus estimate of $752.27 million. Same-store sales rose a robust 8%, but marks a decrease from the 11.5% growth it posted a year earlier. Ulta primarily competes with Estee Lauder (EL) and Elizabeth Arden (RDEN), which do not operate full-service salons. However, Elizabeth Arden notably operates luxury day spas (which offer salon services) under its Red Door banner, but these are slightly different from Ulta's more mainstream services. Looking ahead, Ulta expects to earn $0.60 to $0.63 per share on revenue between $568 million to $577 million, missing analyst expectations on both the top and bottom line. Analysts on average had expected the retailer to earn $0.72 per share on revenue of $579.66 million. Despite this weakness, which the company attributes to macroeconomic headwinds, Ulta intends to open another 125 stores this year, more than the 101 it opened in fiscal 2012. It finished fiscal 2012 with 550 locations. To expand its business, Ulta intends to spend roughly $0.13 per diluted share these investments. Therefore, the company expects capital expenditures to rise from $189 million in fiscal 2012 to $225 million in fiscal 2013. On top of these concerns of rising expenses, weak top and bottom line growth, Ulta also lacks a leader. Last month, the company's CEO Chuck Rubin stepped down to take over as the CEO of Michaels Stores. In addition, a new CFO - Scott Settersten - was only recently made permanent after serving as the interim CFO following the resignation of Bruce L. Hartman last year. Despite these issues, some analysts remain either neutral or bullish on the stock, stating that the company's long-term growth potential is still intact. Credit Suisse raised its rating on the stock to "outperform." However, Sterne Agee cut its price target from $102 to $90, while Oppenheim downgraded the stock to "neutral." Ulta currently trades at 17.87 times forward earnings with a 5-year PEG ratio of 0.99. Although the stock is down approximately 17% over the past twelve months, it has risen nearly 600% over the past five years. Other News About ULTA Ulta Salon Trades Down 17% on Weak Q1 Guidance Ulta Salon plunges after its outlook disappoints. Ulta Salon Shares Fall After Bad Earnings Forecast Ulta tumbles after a bleak earnings forecast. Other Stocks in the News Boeing Says 787s May Be Back Soon Boeing's Dreamliner may be back sooner than you think. BP Cries Foulat "Fictitious" Spill Claims BP defends itself against spill allegations. Copyright 2013 by InvestorGuide.com, Inc. InvestorGuide has no control over the sites we link to, is not affiliated with these sites, and cannot take responsibility for their quality or suitability. The news, analysis, commentary and profile information is not meant to be comprehensive, and the data provided is not guaranteed to be accurate. WebFinance Inc., the publisher of this newsletter, is not a registered investment advisor or a broker/dealer. This is not a stock recommendation newsletter but rather a source for investment ideas, and we encourage you to fully research any company before considering investing. The opinions expressed herein are those of the author and do not necessarily represent the views of nor are they endorsed by WebFinance Inc. No employee of WebFinance has owned or currently owns any shares in the company described above. The above is neither an offer nor solicitation to buy or sell any securities. The trading of securities may not be suitable for all potential readers of this newsletter, and the purchase of stocks mentioned in this newsletter may result in the loss of some or all of any investment made. We recommend that you consult a stockbroker or financial advisor before buying or selling securities or making investment decisions. We are not responsible for claims made by advertisers and sponsors. Anyone who makes decisions based on what they read here does so at their own risk and cannot hold WebFinance Inc. (DBA InvestorGuide.com, Inc.) or its employees responsible.

Published on Mar 22, 2013
By Leo Sun
Leo Sun
Leo Sun is a freelance finance writer and position trader. He focuses on a combination of value and momentum investing, with a strong interest in the trading philosophies of Warren Buffett and Peter Lynch. Leo also has experience writing articles to help small business owners acquire loans and manage their finances. He regularly contributes to the Stock of the Day analysis.

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