ULTA Inventory Rallies After Large Q1 Beat and Raised Forecast

Prospects weren’t the one ones getting blowouts from Ulta Magnificence Inc. NASDAQ: ULTA final week, as the corporate blew away expectations in its Q1 2025 earnings report, launched Thursday after the ultimate bell.

The highest and backside traces beat expectations, wowing analysts and buyers alike, and shares soared greater than 11% to shut out the month of Could. 

The inventory is now up greater than 30% since closing beneath $310 per share on March 13, however how a lot upside stays for the high-end magnificence chain? Regardless of murky technicals and the fixed risk of latest tariffs, Ulta’s comparable gross sales development and strategic initiatives ought to place the inventory for a stable second half in 2025.

A Blowout Quarter Pushed by Spectacular Comp Gross sales Development 

IT‘s been a rocky few months for Ulta, and even Warren Buffett tapped out on his holdings just a few months in the past. Nevertheless, a turnaround has been underway since March, and peeling again the earnings onion reveals why buyers pushed Ulta shares a lot increased on Friday. The corporate reported $2.85 billion in internet gross sales for the quarter ending Could 3, a 4.5% year-over-year (YOY) improve that exceeded the analyst consensus of $2.79 billion. The $6.70 EPS quantity additionally smashed expectations by $0.97, however the actual driver was surprisingly robust comparable gross sales development.

Comparable gross sales embrace income from shops which were open for at the least 14 months, in addition to on-line gross sales. Analysts had been anticipating tepid comparable gross sales development in Q1, as the corporate had stocked up on stock for brand spanking new initiatives, and sentiment surveys confirmed a rise in cost-conscious shoppers. Nevertheless, Ulta’s high-end clientele didn’t obtain that memo, as comparable gross sales development surged previous expectations. 

Wall Avenue had projected comp gross sales development of 0.2%, however the firm reported a 2.9% YOY improve, pushed by bigger ticket sizes and a 0.6% improve in transaction quantity. The spectacular gross sales development enabled the corporate to comfortably beat expectations regardless of really seeing a slight margin lower (39.1% gross versus 39.2% the earlier 12 months).

CEO Kecia Steelman reported fragrances have been the best-performing class with double-digit gross sales development, adopted by single-digit development from skincare. Companies additionally noticed single-digit gross sales development, which is one space the place Ulta has a bonus over competing retailers like Sephora, which don’t provide in-store providers. Whereas comp gross sales development and a large EPS beat have been on the coronary heart of the rally Friday, IT’s the steerage replace that might gas the inventory even increased.

A Strategic Steering Increase Amidst Tariff Uncertainty

Like many consumer-facing firms, tariffs and uncertainty have been scorching subjects throughout the name. CFO Paula Oyibo talked about that whereas uncertainty continues to make steerage projections tough, only one% of the corporate’s merchandise comes from direct imports. Whereas ULTA inventory isn’t anticipated to face a lot margin strain from tariffs, persevering with financial uncertainty is prone to weigh on shoppers, and executives sought to specific an perspective of cautious optimism about the remainder of the 12 months.

CEO Steelman was fast to notice that one quarter doesn’t equal a pattern, however the 2025 FY steerage increase was strategic in tempering expectations whereas nonetheless elevating estimates. The corporate elevated the higher certain of its gross sales, comps, and EPS projections whereas preserving the decrease certain vary unchanged.

• Internet Gross sales: $11.5 billion to $11.7 billion, up from $11.5 billion to $11.6 billion
• Comp Gross sales: 0% to 1.5%, up from 0% to 1%
• Diluted EPS: $22.65 to $23.20, up from $22.50 to $22.90

The increasing ranges give the corporate wiggle room ought to the economic system deteriorate within the second half of the 12 months, but additionally house for upside surprises if macro situations enhance. The Ulta Magnificence Unleashed plan additionally will proceed to be carried out all year long, which now features a loyalty program with 45 million members and a advertising technique using the successes of a Tremendous Bowl marketing campaign, a partnership with Beyoncé, and the discharge of 19 new manufacturers unique to Ulta shops.

Hovering Value Targets Overlaying Difficult Technicals

Analysts have been out in pressure following Ulta’s earnings report, with at least 10 corporations boosting worth targets following the spectacular beat. Notable worth goal hikes got here from Morgan Stanley, Robert Baird, and JPMorgan Chase, all of whom now undertaking upside of 11% to 17% from the inventory’s closing worth on Friday.

Even corporations with Impartial rankings like Piper Sandler and Citigroup boosted worth targets, however the inventory chart reveals that some revenue taking must be anticipated over the subsequent few periods.

The inventory has retraced greater than 50% of its decline from the all-time excessive shut of $567 again in March 2024, and a Golden Cross is forming because the 50-day shifting common breaches the 200-day shifting common for the primary time since January.

However the Relative Power Index (RSI) has now popped over 78, hinting that the rally is overbought and buyers might look to take earnings following the blowout earnings report. If upward momentum wanes over the subsequent few periods, higher entry factors current themselves within the days or even weeks forward.

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