Jim Cramer - Mad Money Ulta Salon Cosmetics and Fragrance Inc. ULTA-Q DON'T BUY May 24, 2024

They had a great quarter and he loves the CEO. At $438, shares are in no-man's land. Sells at 17x earnings. A good buy, but not a trading stock.

#2 in cosmetics, behind ELF Beauty.

They're positioned well in beauty and benefits from the Instagram Effect. It reports next week.

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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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.

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.

Is worried because competitor ELF reported such a bad quarter.

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.

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