Ulta Beauty stock slides on ‘slower growth than anticipated’

Shares of Ulta Beauty (ULTA) tumbled on Wednesday morning following cautious comments by the company at the JPMorgan Retail Round Up Conference. CEO Dave Kimball, and CFO Paula Oyibo said the company expects its first quarter comparable sales to be on the “lower end” of the first half of the year guide of low single digits amid “slower growth than anticipated in the category so far this year.”

SLOWER GROWTH: Speaking at the JPMorgan Retail Round Up Conference, Ulta Beauty’s management said the company was seeing “a bit slower growth” than it had anticipated in the space this year, with Ulta expecting its first quarter comparable sales to be on the “lower end” of the first half of the year guide of low single digits.

“Consumers are passionate about beauty. It’s an important part of their lives. They connect beauty to their overall wellness and self-care routine. The level of engagement we see in social media and in our stores and online and all the touchpoints we have continues to be very strong. But we also know there’s a lot going on… Economically, there’s kind of mixed data points around the economic situation for the majority of consumers with healthy employment rates, wage growth, but also pressures that we see with raising credit card debt, student loan dynamics, other pressures that we certainly see within our guests. And then more broadly, we know what’s going on in the world around us, whether it’s some of the political challenges, global conflicts, and then our political environment here as we go through an election year,” the company explained at JPMorgan’s conference.

“We had planned for moderation in total category growth to kind of the mid-single digit range. What we’ve seen so far is a slowdown in the total category across price points and segments. So that’s a bit earlier and a bit bigger than we thought. Still growing, still a lot of engagement, all those things that I’ve had. But we’ve seen this growth rate come down probably faster than we anticipated…. Our guidance was 4% to 5% comp for 2024 with the first half being in the low single digits and the second half in the mid-single digits. And I think as we think about the cadence over the year, our guidance reflects our belief about the health of the category… We would expect our Q1 comp to be on the lower end of that first half guide that we provided of the low single digit,” CFO Paula Oyibo said.

PRICE ACTION: In morning trading, shares of Ulta Beauty have dropped over 13% to $450.98. Also lower, peers Coty (COTY) and Estee Lauder (EL) have slipped about 4% o $11.11 and $147.14, respectively.