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2021-09-16 11:34:24

Cosmetics demand returned to pre-pandemic levels

Ulta Beauty posted excellent Q2 financials. Earnings per share were $ 4.56 versus the market consensus of $ 2.59. Returning shoppers and an improved product range have provided significant support to the company’s financial performance. Total sales of cosmetics for the past quarter approached 2019 levels. The company’s management improved its forecast for 2021, which assumes accelerated growth in revenue and margins in 2H21, but at a slower pace compared to 1H21 due to the risk of rising inflation, persisting supply chain problems and uncertainty over COVID-19. A loyalty program, multi-channel engagement, and an innovative brand lineup serve as good long-term drivers of business growth. We are raising our target price for ULTA shares from $ 385 to $ 490.





We like the ULTA business format, which is geared towards satisfying any consumer preference, which keeps loyal customers coming back for shopping. A key factor in the company’s success is the combination of the leading prestigious and mainstream brands in readily available stores. We believe ULTA is well positioned to increase market share and sustainably grow EPS through unique brands, an effective loyalty program, and a shift in consumer preferences towards specialty cosmetics. Among the potential drivers of capitalization growth, one can single out the Analyst Day, which the company will hold in October, and quarterly reports, which will be published in December.

Ulta Beauty is an off-mall, service-oriented retail concept with a differentiated product mix across categories and price points. Ulta offers over 500 brands of cosmetics, fragrances, hair care, and skin care products, as well as personal care appliances and private label Ulta products in cosmetics, skin care, and bath. The company operates nearly 1,200 stores in 50 states, and management estimates that it can grow to ~1,400+ stores over time. It is the only national beauty retailer of prestige, mass, and salon products and services under one storefront.

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