Ulta Beauty Drops 8% Pre-Market On Softer 4Q Results, CEO Change

Shares of Ulta Beauty were down about 7.6% in Friday’s pre-market trading session as the coronavirus pandemic continued to hurt the beauty retailer’s operations during the fourth quarter ending Jan. 30. Meanwhile, both 4Q earnings and revenues came in ahead of the Street’s numbers.

Along with the results, the company announced that its CEO Mary Dillon will be replaced by company’s president David Kimbell, effective in June. Dillon will transition to the role of executive chairman of the company’s board of directors.

Ulta Beauty’s (ULTA) 4Q earnings of $3.41 per share topped the Street’s expectations of $2.35 per share. However, the quarterly earnings declined about 11% year-over-year, due to lower sales.

The company’s 4Q sales of $2.2 billion came slightly ahead of analysts’ expectations of about $2.1 billion but slipped 4.6% year-over-year due to the adverse effect of COVID-19.

Comparable store sales (comps) dropped 4.8% in 4Q, compared to an increase of 4% in the year-ago quarter. Lower comps were due to a 12.2% decline in transactions offset by a 8.3% increase in the average ticket. (See Ulta Beauty stock analysis on TipRanks).

As for FY21, the company expects to report earnings in the range of $8.85-$9.30 per share on revenues in the range of $7.2-$7.3 billion. Comps sales growth is forecasted be the range of 15%-17% for fiscal 2021.

Following the results, Oppenheimer analyst Rupesh Parikh maintained a Buy rating and a price target of $360 (3.6% upside potential) on the stock, saying that “ULTA remains a top pick.”

Commenting on the CEO change, Parikh said, “We have spent a meaningful amount of time with Mary over the years, and her leadership will be missed by the company and the investment community.”

Overall, the rest of the Street has a bullish outlook on the stock with a Strong Buy consensus rating based on 9 Buys and 3 Holds. The average analyst price target of $333.27 implies downside potential of about 4.1% to current levels. Shares have climbed by 45.4% over the past year.

On TipRanks’ Smart Score ranking, Ulta Beauty gets a 9 out of 10, suggesting that the stock is likely to outperform market expectations.

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