Ulta Beauty reports disappointing earnings after Warren Buffett's Berkshire Hathaway takes stake

Ulta Beauty’s (ULTA) glow-up could also be coming to an end.

On Thursday after market close, the sweetness retailer reported second quarter results that missed estimates across the board. Revenue got here in at $2.55 billion, in comparison with $2.62 billion expected. Earnings per share of $5.30 also fell in need of the $5.50 expected.

CEO Dave Kimbell acknowledged the disappointing leads to an earnings call.

“We don’t consider these results reflect the strong engagement with our brand, the strength of our operating model, or the performance I do know we will deliver over the long run,” he said.

He outlined a number of aspects weighing on Ulta, including normalizing demand post-pandemic, more value-conscious consumers, and a shift within the marketplace.

“There are significantly more places to purchase beauty, especially prestige beauty, with greater than 1,000 recent points of distribution opened within the last three years. In consequence, our market share continues to be challenged, particularly inside prestige beauty,” Kimbell said.

Kylie Cosmetics are displayed at Ultra beauty on Nov. 18, 2019, in Latest York City. (David Dee Delgado/Getty Images) (David Dee Delgado via Getty Images)

Same-store sales declined 1.2% yr over yr, a stark contrast to the 8% and 14.4% increases seen in 2023 and 2022, respectively. Ulta now projects same-store sales to fall 2% to 0% for fiscal yr 2024, in comparison with the previous guidance of a 2%-3% jump. It expects revenue to are available in between $11.0 billion and $11.2 billion, lower than the previous range of $11.5 billion to $11.6 billion.

Kimbell said the team is “aggressively taking actions” in five areas: strengthening assortment, expanding social relevance using influencers and creators, enhancing the digital experience, leveraging its loyalty program, and increase its promotional activities.

Shares fell 7% in after-hours trading. The stock has shed roughly 25% for the reason that start of the yr and greater than 30% within the last six months.

Analysts feared these results as consumers have gotten extra mindful about spending while competition is increasing and retail theft stays a difficulty.

“We expect beauty demand may come under pressure in 2024 as consumer budgets remain stressed after two years of elevated rates. We expect consumers will lean into shopping closer to refill, looking for innovation-led solutions, and leveraging consumer rewards,” CFRA analyst Ana Garcia wrote in a note to clients.

Prior to the outcomes, UBS analyst Michael Lasser predicted that Ulta Beauty would once more lower its 2024 guidance. Nevertheless, “ULTA shares are still pricing in an excessive amount of negativity on the long-term growth and margin prospects for this business,” he said.

“We do not view ULTA’s model as broken or structurally disadvantaged.” Moderately, it’s “digesting several years of outsized category growth” and increased competition, including online players like Amazon and TikTok shops, he added.

In accordance with a report from foot traffic analytics platform Placer.ai, Ulta Beauty remains to be seeing outsized foot traffic growth in comparison with the remainder of the sweetness and wellness industry.

On Aug. 14, Berkshire Hathaway (BRK-A, BRK-B) revealed in a regulatory filing that it bought 690,106 Ulta shares in Q2, price roughly $266 million as of the top of June, Yahoo Finance’s Edwin Roman reported.

On the time, BMO Capital Markets managing director Simeon Siegel told Yahoo Finance that the move provided “an enormous stamp of approval for Ulta Beauty.”

Ulta’s stock is up greater than 50% up to now five years, benefiting from a boom in beauty and wellness post-COVID. Nevertheless, it has underperformed the broader market; the S&P 500 is up greater than 90% in the course of the same period.