Ulta Magnificence (NASDAQ:ULTA) has A pair Of huge Inquiries To answer for buyers this week. On Thursday, Dec. 2, The sweetness merchandise and spa providers huge will announce end outcomes for its fiscal third quarter wright hereas issuing An monumental-picture outlook for The important factor journey buying interval forward.
Wall Road is optimistic Regarding the chain’s prospects for closing out 2021 on A strong notice regardmuch less of challenges associated to rising prices And current chain bottlenecks. Neverthemuch less It is much less clear how Ulta will Obtain an more and more digital promoting panorama given its conventional power at serving to buyers experiment with beauty merchandise earlier than buying for them.
With that hugeger picture in thoughts, Permit us to take a Take A look at three metrics worth watching in Ulta Magnificence’s upcoming earnings report.
1. Accelerating rebound
Three months in the past, Ulta surprised buyers by revealing accelerating demand progress Inside The sweetness enterprise. Gross sales jumped to $2 billion from $1.2 billion a yr in the past and $1.7 billion in The identical interval in 2019. That success was powered by usually strong promoting circumstances However in addition by a faster rebound Inside the make-up, skincare, and hair care niches. Ulta Magnificence introduced hovering buyer visitors each on-line and in its retailers by way of late July.
We’ll study on Thursday whether or not these hopeful tendencies carried on into the Q3 interval, which runs by way of late October. Most buyers who Adjust to the inventory are Looking for sales to rise by 17% to $2.6 billion regardmuch less of rising COVID-19 case ranges by way of A lot of the quarter.
2. Making extra income
Ulta’s up So far progress targets suggest modest sales progress by way of 2024 As a Outcome of of The combination of roughly 4% annual positive elements in similar-retailer sales, plus the addition of roughly 50 new retailers Yearly. While buyers Might have been hoping for faster positive elements, the earnings outlook is significantly brighter.
Ulta is concentrating on an working margin of A minimal of 13% this yr, and administration believes They will increase that metric to as extreme as 14% over The subsequent few yrs. Success right here would allow earnings per share to rise at a double-digit compound annual progress price (CAGR). Neverthemuch less it Relies upon upon Ulta effectively maintaining inventory low with out lacking out on altering demand tendencies.
3. The mannequin new outlook
Ulta Magnificence raised its 2021 outlook in every of the final two quarters, and Thursday’s report may embrace one other hike to that forecast. Presently, executives are concentrating on sales between $8.1 billion and $8.3 billion, with an working margin of round 13%. These metrics would translate into earnings per share of between $14.50 and $14.70.
The huger problem To watch over Ulta’s potential hike to these brief-time period forecasts Is whether or not or not the chain’s stpricegic shift is paying off. The agency Isn’t constructing as many huge-format retailers and is investing closely on digital promoting providers.
These strikes ought to assist greater income and lowered monetary hazard, probably On the expense of faster sales progress. However That Can be A lovely commerce-off for buyers Looking for an environment nice retailing enterprise Which will increase earnings by way of A Quantity of promoting circumstances. The 2021 yr will probably set data on this rating, but Ulta Magnificence is placeing itself for steadier annual returns in 2022 and past.