Skip to main content

Ulta Beauty Inc(ULTA-Q)
NASDAQ

Today's Change
Real-Time Last Update Last Sale Cboe BZX Real-Time

Why Ulta Beauty Stock Popped Today

Motley Fool - Fri Dec 1, 2023

Shares of cosmetics retail chain Ulta Beauty(NASDAQ: ULTA) popped on Friday after the company reported financial results for the third quarter of 2023. As of 1 p.m. ET, Ulta Beauty stock was up about 12%.

Beauty spend remains resilient

In Q3 (which ended Oct. 28), Ulta Beauty had net sales of almost $2.5 billion, which was up a healthy 6.4% year over year. Net-sales growth was primarily driven by same-store-sales growth of 4.5%. But the company also opened 12 net new stores during the quarter, which provided a small boost to sales as well.

Ulta Beauty's Q3 gross profit margin was 39.9%, and its operating margin was 13.1%. Both of these profit metrics were down from the prior-year period.

That said, Ulta Beauty's profits were still good and within normal ranges. The chart doesn't reflect the company's Q3 results, but it does show that its gross margin and operating margin were still strong in Q3 compared to its averages over the last five years.

ULTA Gross Profit Margin (Quarterly) Chart

ULTA Gross Profit Margin (Quarterly) data by YCharts

Ulta Beauty is still finding ways to grow. And its profits are holding up nicely. Both of these things were encouraging to investors today.

What to watch with Ulta Beauty

Even after today's rally, Ulta Beauty stock is still about 15% lower than its all-time high. Management has apparently believed its stock was too cheap in 2023, considering it's repurchased 1.8 million shares for $841 million year to date. This makes share repurchases a huge part of its capital-allocation strategy.

In part due to aggressive share repurchases, Ulta Beauty's cash and cash equivalents is now down about 50% year over year, and it borrowed nearly $200 million on a short-term basis in Q3. But it's customary for the company's cash to dwindle this time of year as it builds up inventory for the holiday shopping season. The fourth quarter then usually brings cash back up.

Ulta Beauty CEO Dave Kimbell said, "The holiday is off to a good start." And this is likely why the company raised the low end of its full-year sales guidance, with management now expecting its top line to grow 5% to a new all-time high.

In summary, things are still looking good for Ulta Beauty.

10 stocks we like better than Ulta Beauty
When our analyst team has a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

They just revealed what they believe are the ten best stocks for investors to buy right now... and Ulta Beauty wasn't one of them! That's right -- they think these 10 stocks are even better buys.

See the 10 stocks

*Stock Advisor returns as of November 29, 2023

Jon Quast has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Ulta Beauty. The Motley Fool has a disclosure policy.

Paid Post: Content produced by Motley Fool. The Globe and Mail was not involved, and material was not reviewed prior to publication.