Ulta Beauty Surges on Strong Q4 Earnings and Resilient Guidance

Ulta reported EPS of $8.46, easily surpassing analyst estimates of $7.12, and up from $8.08 in the prior year. Revenue came in at $3.49 billion, slightly ahead of the expected $3.462 billion, but reflecting a 3.1% year-over-year decline as the company lapped an extra week in the previous year's Q4. Comparable sales growth of 1.5% exceeded the 0.8% consensus estimate, driven by a 3% increase in average ticket size, though total transactions declined by 1.4%.

Other key metrics included:

- Gross margin of 38.2%, up from 37.7% last year and beating the 37.2% estimate, benefiting from lower inventory shrink and favorable merchandise mix.

- SG&A expense of $815.6 million, a slight decline year-over-year, driven by improved cost management.

- Merchandise inventories rose 13% to $1.97 billion, reflecting investments in new brands and expanded store footprint.

- Net new stores: +8, slightly below expectations as Ulta continues a measured expansion strategy.

Guidance and Strategic Outlook

For fiscal 2025, Ulta issued revenue guidance of $11.5 billion to 11.6 billion, which is slightly below analyst expectations of 11.668 billion. The company forecasts EPS of $22.50 to $22.90, also below the $23.47 consensus estimate. Comparable sales are projected to be flat to +1%, signaling a slowdown from previous years of stronger growth.

CEO Kecia Steelman, who took over leadership in January, described 2025 as a pivotal year as the company continues to invest in long-term growth initiatives while managing competitive pressures from Sephora, Kohl’s, and Amazon. Despite beauty category growth normalizing, Ulta reiterated its long-term growth targets and emphasized investments in brand differentiation, store refreshes, and e-commerce improvements.

One standout from the quarter was market share trends. Management acknowledged that Ulta lost beauty market share for the first time in 2024, a concerning development given the category's prior resilience. However, the company is working to reverse this trend with a renewed focus on loyalty programs, exclusive brand partnerships, and digital enhancements.

What’s Driving the Stock Reaction?

Despite the slight revenue and EPS guidance miss, Ulta’s results were better than feared, especially given the sharp decline in the stock over the past year, down nearly 45% from its highs. The better-than-expected Q4 performance, combined with a relatively conservative outlook, may have reassured investors that Ulta can navigate the challenges ahead.

The beauty retailer is also benefiting from lower shrink, inventory loss due to theft and inefficiencies, which has weighed heavily on other retailers. Management highlighted that shrink has declined 20 basis points year-over-year, thanks to enhanced security measures, better inventory controls, and investments in loss prevention.

Analyst Reactions and Price Target Adjustments

Following the report, analysts made mixed revisions to their price targets, reflecting both the near-term uncertainty and Ulta’s longer-term potential. Notable moves include:

- B. Riley lowered its PT from $430 to $330 while maintaining a Neutral rating.

- Evercore ISI reiterated Outperform with a $465 PT.

- JPMorgan slightly reduced its PT from $480 to $475, maintaining an Overweight stance.

- Jefferies, Stifel, Barclays, and Wells Fargo all trimmed their price targets, but overall, analysts maintained their existing ratings rather than downgrading the stock.

The Bottom Line

Ulta’s Q4 earnings beat expectations, but its cautious 2025 guidance underscores the ongoing challenges in the retail sector. That said, the strong post-earnings stock reaction suggests that much of the downside had already been priced in, and some investors are betting that momentum can build off the lows.

However, profit-taking risk remains high, as the stock has been in a prolonged downtrend. Given the mixed analyst reactions, traders may look to play short-term momentum, but long-term investors will want to see further signs of stabilization in comps and market share before committing to a sustained turnaround story.