People walk past an Ulta Beauty store in the Manhattan borough of New York City, New York, USA, on March 8, 2022.
Carlo Allegri | Reuters
Ulta Beauty Shares plunged about 13% on Wednesday as CEO Dave Kimbell warned of slowing demand for beauty products.
Other stocks in the segment include ELF beauty, Estee Lauder And Cotyalso fell on Wednesday morning.
“We have seen a slowdown in the overall category,” Kimbell said at an investor conference hosted by JPMorgan Chase. “We came into the year – and talked about it at our party [earnings] Called a few weeks ago – I expect the category to be moderated. It has [had], as I said, several years of strong growth. We didn’t expect the growth rate to continue.”
He said Ulta expects mid-single-digit sales growth for the year.
But Kimbell added that the slowdown happened “a little earlier and a little bigger than we thought.” He said the trend spans across all price points and different beauty categories, but has greater significance in prestige makeup and hair care.
Beauty has emerged as one of the hottest categories in retail. Even as U.S. consumers watch their spending on necessities like clothing, they continue to rely on makeup, skin care items and other beauty products. The strength of the category has inspired many retailers to focus more on beauty.
Target has opened a growing number of Ulta Beauty stores within its stores. Kohl’s plans to open Sephora stores in all locations. Macy’s is expanding its Bluemercury beauty chain.
But in his remarks Wednesday, Kimbell said cosmetics shoppers are not immune to economic pressures, even in a category that is red-hot. He pointed to dynamics that could cause them to scale back spending, including rising credit card debt, geopolitical conflicts and the upcoming presidential election.
“It just creates this soup of activity for our consumers that they want to navigate through,” he said.
Ulta said in an earnings call last month that it expected net sales of $11.7 billion to $11.8 billion for fiscal 2024. That would be more than the $11.2 billion in revenue the company reported in its last fiscal year.
The retailer said it expects comparable sales, a measure that strips out the impact of store openings and closings, to rise 4% to 5% this fiscal year. That would be a slowdown from growth of 5.7% in the previous fiscal year and 15.6% in fiscal 2022.
Ulta shares were trading at around $447 as of midday Wednesday. Its shares hit a 52-week high of $574.76 in mid-March, just before the company released its holiday quarter results. So far this year, Ulta shares have fallen nearly 8%, lagging the S&P 500’s nearly 10% gains.
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2024-04-03 16:13:40
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