People walk past an Ulta Beauty store in the Manhattan borough of New York City, New York, U.S., March 8, 2022. REUTERS
(Reuters) – Ulta Beauty drew demand for higher-priced products and pulled in young customers through its CEO Kecia Steelman’s TikTok push, helping the cosmetics retailer raise annual profit forecast and beat first-quarter estimates on Tuesday.
Affluent households splurged on the company’s trendy and premium categories such as fragrances, underscoring an uneven economic rebound where the wealthy drive consumer spending, while low-income families are forced to make more calculated, trade off-laden buying.
Steelman, under whose leadership Ulta is undergoing a turnaround, said it gained market share in prestige beauty, thanks to brands such as Estee Lauder, while mass beauty was roughly flat.
“Consumers continue to face macroeconomic uncertainty and inflationary measures and pressures from rising fuel prices, making value increasingly important as a consideration,” Steelman said on the post-earnings call.
Ulta Beauty has also introduced celebrity-owned brands such as Rihanna’s Fenty Beauty, Selena Gomez’s Rare Beauty and Beyonce’s Cecred to attract GenZ and millennial shoppers. Its shares were up about 2% in extended trading.
Comparable sales rose 5.3% during the quarter ended May 2, versus a 2.9% increase a year ago. Analysts were expecting sales to increase 4.5%, according to data compiled by LSEG.
“Investor focus will likely remain centered on a more cautious consumer backdrop, tougher near-term compares, and the cadence of margins through the year,” TD Cowen analyst Oliver Chen said.
Ulta’s investments in strengthening its assortment, social platforms such as TikTok Shop and AI-powered tools such as Google Search and the Gemini app have been helping it fuel customer reach amid stiff competition.
“The company continues to outperform other beauty retailers, such as department stores,” said Morningstar analyst David Swartz.
Ulta expects full-year earnings per share to be between $28.36 and $28.80, compared with its prior forecast of $28.05 to $28.55.
It posted first-quarter earnings per share of $7.74, topping analysts’ estimate of $6.86.
Reporting by Anuja Bharat Mistry in Bengaluru; Editing by Shilpi Majumdar
