Ulta Salon Cosmetics and Fragrance Inc. (ULTA)

Earlier this month they reported strong same-store sales, but higher than expected costs, so earnings missed and shares have fallen. Is down 23% the past month. Has long liked this.

AI can't disrupt this. The younger generation are focused on beauty in a way that none of his generation were. Trades at a reasonable PE.

Is up 54.4% since Steelman becaame the CEO a year ago to today's record high. Is still room to run. What changed was that investors stopped worrying about consumer stocks when they saw that the Fed would keep cutting interest rates in December, a strong earnings season for retail especially after US Thanksgiving. On Dec. 4 they reported great numbers: net sales up 12.9% YOY, same-store sales 6.3% YOY, both beating the street. Gross margin profit was up 40.4%, also beating. They raised their full-year forecast across the board.

EPS of $6.70 beat estimates of $5.80; revenue of $2.84B beat estimates of $2.79B. EBITDA of $473M beat estimates by 13%. Ulta Beauty's slight increase to fiscal 2025 sales and earnings guidance reflects better-than-expected 1Q results -- a positive signal that its bid to regain market share is working. Continued execution, including leaning into exclusive, new and higher-end brands, in coming quarters is essential, especially since the conservative outlook implies sales gains are poised to slow to an average 2% in 2Q-4Q -- less than half of 1Q's five-quarter best of 4.5%. Steady demand could allow for further surprises, especially since year-over-year comparisons should get easier. Rising costs still appear set to weigh on adjusted operating margin this year. Margin was better than anticipated in 1Q, though still lower year over year. There has certainly been an improvement here recently. Risks include continue economic uncertainty, tariffs and the usual market risks, but the stock is now up 8% YTD and we would have a bit move confidence overall.
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Kohl's is doing so poorly that he expects people to gravitate away from Sephora and return to Ulta, which is under new management,

It reports Thursday. It remains the most relevant, reasonable cosmetics chain. Ulta has got to win back customers from Amazon.

All of the downside is priced in, seeing upward movement from a technical perspective. Underperformed major indexes by a fair amount, now showing signs of turnaround for a value play. Great product, good distribution channels. No dividend.

Is worried because competitor ELF reported such a bad quarter.

Underperforming. Great specialty beauty retailer in the US, partners with Target. Chart's a roller-coaster, too volatile for her. You can trade it if you want, get in and get out, but she's staying away.

It reports Thursday. But he keeps hearing Sephora is eating into their business, and that ULTA is not doing so well.

Revenues are up 22% over 3 year, but only 6% in the past year. Shares are down 24% in the past 12 months. It's a maturing stock.

EPS of $8.08 beat estimates of $7.57. Revenue of $3.55B beat estimates by 6.7%. EBITDA of $579M beat by 5.6%. Conservative guidance worried investors, though. Ulta Beauty's outlook for more operating-margin deterioration in fiscal 2024 is a bit of a concern, given the metric fell more than 100 bps to 15% in 2023 and since big market-cap hardline peers are largely projecting improvement this year. Beauty demand remains robust, as evidenced by strong 4Q results, including a 14.6% operating margin -- up vs. 3Q and above management's guidance. This strength in demand should let discounts remain limited, a tailwind for margin. The company's forecast for $11.7-$11.8 billion in sales for 2024 appears low, implying less than 5% growth at the midpoint, or about half of 2023's almost 10% gain. This might be too drastic a slowdown, even with tough year-over-year comparisons, considering its growing customer base and expanding store fleet. We are comfortable still, but it needs to be watched a bit more closely than usual. 
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They're positioned well in beauty and benefits from the Instagram Effect. It reports next week.

#2 in cosmetics, behind ELF Beauty.