Ulta Beauty (ULTA) Q2 Earnings in Focus: Things You Should Know

Ulta Beauty, Inc. ULTA is likely to display year-over-year improvements in the top and bottom lines, when it reports second-quarter fiscal 2021 numbers on Aug 25. The Zacks Consensus Estimate for revenues is pegged at $1,766 million, suggesting a jump of 43.8% from the prior-year quarter’s reported figure. The company had witnessed a revenue increase of 65.2% in the last reported quarter.

The Zacks Consensus Estimate for earnings has moved 6.3% north over the past seven days to $2.36 per share, which indicates a considerable improvement from the 73 cents reported in the prior-year period.

Ulta Beauty Inc. Price, Consensus and EPS Surprise

Ulta Beauty Inc. price-consensus-eps-surprise-chart | Ulta Beauty Inc. Quote

Key Factors to Note

Ulta Beauty has been focused on its six strategic priorities. The company’s foremost priority is to strengthen its omnichannel business, and explore the potential of both physical and digital facets. Next, the company has been undertaking various tools to enhance experience of guests, like offering a virtual try-on tool and in-store education, and reimagining fixtures, among others. Thirdly, the company concentrates on offering customers a curated and exclusive range of beauty products through innovation. Fourthly, the company is focused on deepening customer engagement by boosting rewards and loyalty programs. Fifthly, management is committed to optimizing its cost structure. Apart from these, the company strives to boost organizational talent and strengthen culture.

Talking of e-commerce, it delivered a solid performance in the fiscal first quarter, rising in the mid-teens range on the back of robust traffic and increased average order. Buy online, pick up in-store or BOPIS penetration elevated to roughly 16% of total e-commerce sales in the first quarter, up from 4% in the same period last year. Apart from these, the company’s stores and ship-to-home channels drove e-commerce sales. The company’s initiatives to boost online promotions and customer engagement have also been supporting online sales growth. With consumers growing enthusiasm toward online sales, management is on track with its expanding capacity at fulfillment centers, expansion of ship from store capabilities as well as curbside pickups. The company is also benefiting from its mobile app and virtual try-on capabilities. These upsides bode well for the quarter under review.

Ulta Beauty’s skincare category has been doing well for a while. The company has been seeing market share gains in major beauty categories, with skincare standing out, thanks to consumers’ increased focus on self-care and wellness. The trend continued in the first quarter of fiscal 2021, wherein skincare saw sturdy sales growth. Consumers have been showing rising interest in new brands like Keys Soulcare, LOLI Beauty, and Urban Skin Pro, as well as from new products under Tula, Pacifica, and Central Bay. Apart from these, the company saw strength in the fragrance and haircare category, with the latter gaining on the DIY trends, hair color, color care, and hair styling tools. Increased focus on skincare and hair amid higher at-home grooming works well for these categories.

That said, sluggishness in the make-up category has been a concern. Apart from this, any rise in SG&A costs might have impacted margins.

What the Zacks Model Unveils

Our proven model predicts an earnings beat for Ulta Beauty this time around. The combination of a positive Earnings ESP, and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold), increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Ulta Beauty currently carries a Zacks Rank #2 and has an Earnings ESP of +17.59%.

Other Stocks With Favorable Combinations

Here are some other companies you may want to consider, as our model shows that these too have the right combination of elements to post an earnings beat this season.

Burlington Stores BURL has an Earnings ESP of +15.26% and sports a Zacks Rank #1, currently. You can see the complete list of today’s Zacks #1 Rank stocks here.

DICK’S Sporting DKS has an Earnings ESP of +3.59% and carries a Zacks Rank #2, at present.

Costco Wholesale COST has an Earnings ESP of +0.44% and currently holds a Zacks Rank #3.

Tech IPOs With Massive Profit Potential: Last years top IPOs surged as much as 299% within the first two months. With record amounts of cash flooding into IPOs and a record-setting stock market, this year could be even more lucrative. 

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.