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Shares of Ulta Beauty Inc. slid 29% on Friday, preparing them for their largest one-day percentage decline, after the beauty retailer warned that headwinds on sales would weigh on future profits.
This operation weighed on other cosmetic titles with e.l.f. Beauty inc.
ELF, -2.57%
4.3% and Estée Lauder Cos. Inc.
EL -2.76%
down 2.4%.
Bolingbrook, Ulta based in Ill.
ULTA, -29.55%,
Kylie Jenner, a reality TV star, reported earnings of $ 161.3 million, or $ 2.76 a share, in the second quarter, up from $ 148.3 million, or $ 2.46 a year. in the period of the previous year. Revenues increased 12% to $ 1.67 billion. Analysts surveyed by FactSet were expecting a profit of $ 2.80 per share for a $ 1.68 billion business figure.
But it is the low orientation that really weighed on the title. Ulta reduced its growth in same-store sales growth from 4% to 6% for the year, from 6% to 7%. He lowered his earnings per share forecast to 12.83 USD, from 12.83 USD to 13.03 USD between 11.86 and 12.06 USD.
"We are confident that the industry's makeup challenges will continue in the near term, so we have adjusted our outlook for the remainder of 2019 to reflect the continued volatility of the category," he said. Executive Director, Mary Dillon, to the analysts. on the call of the company's results, according to a FactSet transcript.
This news resulted in at least four downgrades, as analysts lowered estimates and lowered stock price targets. The average price target analysts surveyed by FactSet fell to 307.17 dollars Friday morning, against 376.56 dollars at the end of July.
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Morgan Stanley analyst Simeon Gutman reduced the stock to a weight equal to the overweight one and reduced his stock price target to $ 275 instead of $ 395. The quarter was a "changing thesis," with growth prospects for half of the business – cosmetics – slowing significantly, Gutman wrote in a note to customers.
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When Morgan Stanley revalued the stock in January 2018, analysts expected several factors to help it outperform, including the fact that the company had experienced additional growth in square footage in the first quarter. during the construction of its stores.
"We think these factors have moderated as the risk of differentiation of numerically indigenous brands seems higher," wrote Gutman. "We believe this limits growth prospects for both multiples and for Ulta."
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Piper Jaffray downgraded its stock by making it neutral and reduced its stock price target to $ 360 from $ 360 to $ 250. Analysts led by Erinn Murphy said they would prefer to be sidelined during a period of "reduced visibility".
"What worried us was that this weakness is not only about prestige (which has been the case for more than 18 months), but the management has declared masstige as having weakened since the beginning of the quarter, after several quarters of double-digit growth, Murphy said. "While the company has done an excellent job of countering the general market trend by securing digital native brands, we are concerned that the business trajectory has slowed down."
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According to William Blair's analyst Daniel Hofkin, Ulta executives were unable to provide a convincing explanation of why things had slowed so dramatically in the last six weeks, nor did he .
Management stated that sales of cosmetics were affected by a significant lack of novelty and incrementality, which meant that any novelty did not really resonate with consumers and that, even in this case, it did not incite them. not to buy accessories such as makeup brushes.
"While this is certainly plausible, we find it difficult to understand why this trend would cause such a sudden decline in the trajectory of the category as a whole, especially since material novelty has been lacking in the cosmetics category since nearly two years (especially compared to several previous years, "writes the analyst in a note to customers.
See: Estée Lauder exceeded expectations thanks to China and travel retail, but activities in America stagnated
Hofkin said it was sticking to its outperformance rating as it continued to view the company as having a strong history of long-term growth.
Analysts at Stifel, led by Mark Astrachan, lowered their price target from $ 315 to $ 250, while JPMorgan's Christopher Horvers lowered his target from $ 395 to $ 317. Stifel is sticking to a sustainment rating, while JPMorgan remains overweight.
Cowen, Oliver Chen, said the cosmetics industry was experiencing a more flexible cycle that did not require a high number of units per transaction. Recent trends, such as outlines and eyebrows that involve rituals and application techniques that stimulate growth, have reached their peak.
Chen said he's sticking to his performance outperformance based on a long-term view given the attractiveness of Ulta for Generation Z and a model focused on data with more than 33 million loyal members. However, "ULTA's diversified portfolio in terms of price, categories and news is not immune to the underlying market dynamics, despite the fact that ULTA has effectively weathered the slowdown in Prestige trends since mid-2017 through a series of ongoing brand launches and expanded product mixes, "he wrote.
Cowen lowered its stock price target from $ 375 to $ 313.
Ulta shares are now down 2% in 2019, while the S & P 500
SPX, + 0.06%
gained 17% and the Dow Jones Industrial Average
DJIA, + 0.16%
gained 13%.
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